Norway remains highly prosperous and egalitarian, but modest growth and sovereign wealth fund risks underscore a need for fiscal and structural reform.
By Hansjörg Blöchliger, OECD Economics Department
Norway remains among the world’s most prosperous countries, bolstered by a sound macroeconomic framework, a highly skilled workforce and well-anchored wage settlements. And it is among the most egalitarian, thanks to high labour force participation and compressed wages.
Yet its lead over most other OECD countries is narrowing. Overall growth remained modest at 1.1% in 2025. While momentum is gaining ground, downside risks persist, notably the possibility of a sudden and sustained decline in the value of the sovereign wealth fund.
Strengthening the fiscal rule could help tame public spending
The latest OECD Economic Survey of Norway calls for bold reforms. Better fiscal policy should be on top of the list. Public spending as a share of GDP has continuously risen over the past two decades. Withdrawals from the sovereign wealth fund now finance 27% of public expenditure – it was only 3% in 2001. The non-oil budget deficit is at a record 12% of mainland GDP. Complementing the current well-established fiscal rule with a medium-term spending plan could limit spending growth, contain spending excesses and smooth spending over time.
Inflation persists above target. It fluctuates at around 3%, with domestic cost pressures being the main culprit. In May 2026 the policy rate was raised to 4.25% as inflation pressures were mounting in the wake of rising energy and import prices.
Monetary policy needs to remain appropriately restrictive until inflation is durably anchored at target. In this context, the forthcoming renewal of Norges Bank’s mandate should reaffirm—and possibly, reinforce—the primacy of price stability within the flexible inflation‑targeting framework. Preserving the central bank’s operational independence will be essential to underpin policy credibility.
Education and foundational skills: a wake-up call
Norway’s PISA scores have dropped sharply over the past decade, which could jeopardize long-term economic growth and well-being. Differences between high- and low-performers within schools are among the largest in the OECD. The government should reboot the education system by:
- Better taking account of individual student needs;
- Improving teaching quality;
- Granting more autonomy to schools and municipalities in classroom management;
- Streamlining the curriculum and strengthening core competencies;
- Using more standardised testing and grading.
Deepening trade relations to manage global value chain disruptions
As an exporter of key commodities, Norway is better placed to deal with global value chain disruptions than most other countries. Yet recent geopolitical and economic tensions have raised the prominence of economic security. To strengthen the security of its supply chains, Norway should maintain inventories of critical goods, while abandoning self-sufficiency targets. It should also extend and deepen international trade agreements.
Unleashing business dynamism
Norway’s business climate is generally good, but not perfect. The firm entry rate has declined and the expansion of existing firms is limited. This is likely due to regulatory burdens, which are higher in Norway than in the average European country. To boost productivity and innovation, Norway should:
- Reduce administrative reporting burdens and compliance costs;
- Apply risk-proportionality in licensing requirements;
- Conduct a broad review of regulations;
- Support successful firm restructuring, in particular for small businesses.
Norway has the capacity to maintain its edge, but it needs to modernize the policy framework. The right reforms are an opportunity to do so.
For more charts and data from the publication launch visit the Norway Economic Snapshot page
Reference:
OECD (2026), OECD Economic Surveys: Norway 2026, OECD Publishing, Paris,