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NORWAY: 2025 Budget A Little More Expansionary Than Norges Bank Projections

NORWAY
CEEMEABulletNorwayGlobalFixed Income BulletsForeign Exchange BulletsRegionMarkets

Norwegian fiscal policy is set to be a little more expansionary than currently assumed by Norges Bank in 2025. On net, this may be slightly hawkish input to the next rate path projection presented in December. The structural, oil-corrected budget deficit (SBD) is forecast to be 10.9% of mainland trend GDP, above the Norges Bank’s 10.7% forecast (and vs 10.4% in 2024).

  • As such, the Finance Ministry estimates the 2025 fiscal impulse (the change in the SBD compared to the prior year) at 0.5pp, vs Norges Bank’s 0.3pp projection.
  • As a share of the sovereign wealth fund, the SBD is expected to be 2.5%, in line with the Norges Bank’s projection.
  • We note that the Finance Ministry’s forecasts for growth appear much more optimistic than the Central Bank (which is likely partly a function of the more expansionary than expected fiscal policy): Mainland GDP growth is expected at 2.3% in 2025, compared to a 1.1% Norges Bank projection. 
  • The Finance Ministry notes that in recent years “the government has significantly strengthened defence, security and preparedness, and these areas are also prioritized in the budget for 2025”.
  • Further details will be released at 0900BST/1000CET, after which we can calculate an initial estimate of Norges Bank FX transactions for next year. 
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Norwegian fiscal policy is set to be a little more expansionary than currently assumed by Norges Bank in 2025. On net, this may be slightly hawkish input to the next rate path projection presented in December. The structural, oil-corrected budget deficit (SBD) is forecast to be 10.9% of mainland trend GDP, above the Norges Bank’s 10.7% forecast (and vs 10.4% in 2024).

  • As such, the Finance Ministry estimates the 2025 fiscal impulse (the change in the SBD compared to the prior year) at 0.5pp, vs Norges Bank’s 0.3pp projection.
  • As a share of the sovereign wealth fund, the SBD is expected to be 2.5%, in line with the Norges Bank’s projection.
  • We note that the Finance Ministry’s forecasts for growth appear much more optimistic than the Central Bank (which is likely partly a function of the more expansionary than expected fiscal policy): Mainland GDP growth is expected at 2.3% in 2025, compared to a 1.1% Norges Bank projection. 
  • The Finance Ministry notes that in recent years “the government has significantly strengthened defence, security and preparedness, and these areas are also prioritized in the budget for 2025”.
  • Further details will be released at 0900BST/1000CET, after which we can calculate an initial estimate of Norges Bank FX transactions for next year.