(Bloomberg) -- The Norwegian economy is “on track to a calmer place,” with a strong labor market underpinning a soft-landing case, according to the fossil-fuel-rich country’s finance minister.
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“We have the most difficult period behind us,” Trygve Slagsvold Vedum said in an interview in Oslo on Tuesday. While price growth remains “too high,” it’s seen gradually subsiding, he said.
Norway’s mainland economy coped somewhat better with the stubbornly high inflation rate and surging credit costs last year than most of its regional peers, while the central bank expects it to narrowly skirt a full-year recession this year.
Read More: Norwegian Economy Shrinks, Backing Central Bank’s Cooling Case
To rein in inflation that’s still among the fastest in western Europe, Norges Bank’s policymakers started a string of interest-rate hikes in September 2021 that’s been the longest in the G-10 sphere of major currency jurisdictions. Now Norway looks increasingly likely to be the last in that club to begin easing, as the latest rate path projection signals the first cut in borrowing costs from the autumn from the current 4.5%.
The Finance Ministry sees this year’s average annual inflation at 3.8%, according to October estimates, while Norges Bank expects prices to grow 4.4%. That compares with a 3.5% median forecast by analysts that would still be the fastest pace among major currency holders.
A robust performance by Norway’s oil and gas-linked sectors due to sanctions against Russia has helped to offset a slowdown in construction and retail industries, while its currency’s depreciation has also benefited other exports, such as seafood.
Vedum said the recent strengthening of the krone from the weak levels “could cause secondary effects” for inflation. He also said it’s too early to say the battle with inflation is won.
Still, with employment hovering around 70% and registered unemployment at less than 2%, the Labor-led minority government — where Vedum’s Center Party is the junior partner — expects a soft landing.
“Norwegian companies are looking for workers,” Vedum said. “Of course, if you look at construction, for example, it’s a bit more difficult. But looking broadly, there is a continued demand for new people in the Norwegian labor market and many Norwegian companies are doing well even though these have been very challenging times.”
--With assistance from Jody Megson.
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