Taking my previous comments on the most likely public spending and revenue developments in 2021 together, we may conclude that there is a significant risk that the budget deficit will overshoot its reference level of 7.7% of GDP next year. As I have already said, public spending forecasts are subject to certain upside risks, basically deriving from a possible intensification of the pandemic, which we have in fact been seeing in recent weeks in Spain and in the rest of Europe. This may require some of the discretionary measures adopted to protect households, the self-employed and businesses to be extended for longer than initially envisaged. At the same time, we cannot rule out the unemployment rate, and thus spending on unemployment benefit, behaving less favourably than expected. In turn, public revenue projections face downside risks mainly linked to a relatively optimistic forecast for GDP growth and, consequently, for the increase in the tax base in 2021. As regards the fiscal policy stance, this is usually approximated by the change, from one year to the next, in the general government structural balance, a variable that is not directly observable and can only be estimated with a high degree of uncertainty. According to the information contained in the Draft Budgetary Plan, the structural balance will deteriorate from -4.1% of GDP in 2019 to -5.4% in 2020, and again in 2021 to -6.3% (see Chart 14). Accordingly, the fiscal policy stance will be expansionary in 2020 (-1.4 pp), 24  and in 2021 (-0.8 pp).
A strong krone and low external price impulses will continue to have a dampening impact on inflation, and inflation will remain below target for some time. Further ahead, higher capacity utilisation and profitability in the business sector point to a pickup in wage growth. At the same time, the fall in import prices will slow. To conclude: Norway has weathered the financial crisis better than most countries, and the economic recovery in Norway is now on a firm footing. Currently, interest rates are low, with the key policy rate at 2 per cent. In the years ahead, there are prospects for fairly strong growth in the Norwegian economy, driven by solid income growth, rising investment and high population growth. On balance, the consideration of stabilising inflation, as well as developments in output and employment, imply a gradual increase in the key policy rate towards a more normal level. Thank you for your attention. BIS central bankers’ speeches  11