OECD on the Norwegian economy: High activity and challenges for fiscal policy

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OECD today published their biannual survey of the Norwegian economy, with recommendations on how the government should face important challenges ahead. The report illustrates the high activity of the Norwegian economy heading out of the pandemic. At the same time, there is a need to tighten economic policy as the activity continues to increase.

OECD stresses that the Norwegian economy has entered a new phase in which the fiscal policy space is tighter. New budgetary priorities will require cuts in other items. The survey also recommends measures to lift productivity and labour force participation. Although the pandemic demonstrated the value of protective labour market policies, the survey finds that there is room for adjusting sick leave compensation and disability support in order to stimulate work.

“The OECD survey shows that Norwegians today enjoy the benefits of choices made by those who came before us. National control over our natural resources and the idea of shared prosperity is the foundation of our welfare society. This has resulted in Norway being characterized by equality. To maintain our high level of welfare, politicians must dare to prioritize tougher than they have had to in recent years”, says the Norwegian Minister of Finance, Trygve Slagsvold Vedum.

This year’s survey devotes a full chapter on housing and the need to make housing affordable. OECD highlights two areas of attention. On the one hand, there is a need to boost housing supply, mainly through lighter regulations. On the other hand, the tax system should be gradually adjusted to reduce the bias favouring established homeowners.

“Norway will continue to be a country of home ownership. Political consensus centres on reduced taxation of people’s home. We have had and will continue to have a redistributive tax system, with higher taxes on secondary homes and the most expensive primary homes, combined with lower taxes on housing for ordinary people. We have also made the tax system more redistributive, by reducing taxes on low and middle incomes and slightly increasing levies on the wealthiest”, says the Finance Minister.

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