OSLO: The Norwegian economy is set to surpass its pre-pandemic size by the end of 2021 amid a strong rebound in growth, the International Monetary Fund (IMF) said in a report on Monday.

Mainland gross domestic product (GDP), a key measure that excludes the volatile impact from Norway's oil and gas output, is projected to swing to growth of 3.2% in 2021, the IMF said, from a 2.5% contraction last year.

In the medium term, the size of the economy is now expected to be only slightly below its original trajectory as seen before the COVID-19 outbreak, it added.

Norway was among the first countries in Europe to impose a national lockdown last year, followed by rapid interest rate cuts and a surge in fiscal spending from the country's $1.3 trillion sovereign wealth fund, the world's largest of its kind.

"The strong policy response has helped the country to experience one of the lowest infection rates and among the smallest economic contractions in Europe," the IMF wrote.

"Norway looks to be headed for a strong economic recovery this year, though substantial risks and uncertainties remain, including some related to the pace of vaccinations and infection rates," it added.

As the pandemic recedes, Norway should gradually withdraw fiscal and monetary stimulus and turn its attention to longer term fiscal policy challenges as the population ages and oil revenue is expected to gradually decline, the IMF said.