Economy of Norway

Economy of Norway
Currency 1 Norwegian krone (NOK) = 100 øre= €0,1
Calendar year
Trade organisations
 OECD, WTO, European Economic Area and others
Statistics
GDP $0.4 trillion (2017 est.)
GDP rank 23rd (nominal) / 45th (PPP)
GDP growth
 0.7% (2013 est.)
GDP per capita
 $70,100 (2015 est.) (PPP) (3rd)
GDP by sector
 agriculture: 2.2%; industry: 45.1%; services: 52.7% (2009 est.)
2.7% (2011 est.)
25 (2008)
Labour force
 2.8 million (2015 est.)
Labour force by occupation
 agriculture: 2.9%; industry: 21.1%; services: 76% (2008)
Unemployment 4.3% (July 2015)[1]
Average gross salary
 520,000 NOK / €56,000/$62,000, yearly (2015) [2]
382,000 NOK / €41,000/$45,000, yearly (2015) [2]
Main industries
 petroleum and natural gas, food processing, shipbuilding, wood pulp and paper products, metals, chemicals, timber, mining, textiles, fishing
6th[3]
External
Exports $0.2 trillion (2012 est.)
Export goods
 petroleum and petroleum products, machinery and equipment, metals, chemicals, ships, fish
Main export partners
  United Kingdom 25.6%
 Germany 12.6%
 Netherlands 12.0%
 France 6.7%
 Sweden 6.3%
 United States 5.0% (2012 est.)[4]
Imports $0.1 trillion (2012 est.)
Import goods
 machinery and equipment, chemicals, metals, foodstuffs
Main import partners
  Sweden 13.6%
 Germany 12.4%
 China 9.3%
 Denmark 6.3%
 United Kingdom 6.1%
 United States 5.4%
(2012 est.)[5]
FDI stock
 $0.1 trillion (31 December 2009 est.)
$0.5 trillion (30 June 2009)
Public finances
30.3% of GDP (2012 est.)
Revenues $0.3 trillion (2012 est.)
Expenses $0.2 trillion (2012 est.)
Economic aid $2.2 billion (donor), 0.87% of GDP (2004)
Foreign reserves
 $55 billion (March 2011)[8]
Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars.
Norway's GDP, 1979 to 2004. Source: Statistics Norway.

The economy of Norway is a developed mixed economy with state-ownership in strategic areas. Although sensitive to global business cycles, the economy of Norway has shown robust growth since the start of the industrial era. Shipping has long been a support of Norway's export sector, but much of Norway's economic growth has been fueled by an abundance of natural resources, including petroleum exploration and production, hydroelectric power, and fisheries. Agriculture and traditional heavy manufacturing have suffered relative decline compared to services and oil-related industries, and the public sector is among the largest in the world as a percentage of the overall gross domestic product. The country has a very high standard of living compared with other European countries, and a strongly integrated welfare system. Norway's modern manufacturing and welfare system rely on a financial reserve produced by exploitation of natural resources, particularly North Sea oil.[9][10][11][12][13]

History

Pre-industrial revolution

Prior to the industrial revolution, Norway's economy was largely based on agriculture, timber, and fishing. Norwegians typically lived under conditions of considerable scarcity, though famine was rare. Except for certain fertile areas in Hedemarken and Østfold, crops were limited to hardy grains, such as oats, rye, and barley; and livestock to sheep, goats, cattle, pigs, and some poultry; in places this was complemented with hunting. In areas of Central and Northern Norway, the Sami subsisted on the nomadic herding of reindeer. Fishing all around the coast was dangerous work, though fish such as herring, cod, halibut, and other cold-water species were found in abundance. The introduction of the potato to Norway (in the 18th century) provided considerable relief for Norwegians.

All around the coast, the harvesting of fish (including cod, herring, halibut, and other cold water species) was an important supplement to farming and was in many areas in the north and west the primary household subsistence. Fishing was typically supplemented with crop-growing and the raising of livestock on small farms.

The economic conditions in Norway did not lend themselves to the formation of feudal system, though several kings did reward land to loyal subjects who became knights. Self-owning farmers were—and continue to be—the main unit of work in Norwegian agriculture, but leading up to the 19th century farmers ran out of land available for farming. Many agricultural families were reduced to poverty as tenant farmers, and served as the impetus for emigration to North America.

Industrial revolution

Capital formation 1865 – 2003 Source: Statistics Norway

Aside from mining in Kongsberg, Røros and Løkken, industrialization came with the first textile mills that were built in Norway in the middle of the 19th century. But the first large industrial enterprises came into formation when entrepreneurs politics, leading to the founding of banks to serve those needs.

Industries also offered employment for a large number of individuals who were displaced from the agricultural sector. As wages from industry exceeded those from agriculture, the shift started a long-term trend of reduction in cultivated land and rural population patterns. The working class became a distinct phenomenon in Norway, with its own neighborhoods, culture, and politics.

Social democratic reforms and state ownership

Public vs. private consumption Source: Statistics Norway

The roots of the socialist movement in Norway were based on dangerous working conditions, exploitative labor relations policies, and the demand for collective bargaining. As socialism became part of the mainstream labor movement, it also became part of the mainstream political discourse.

The state has large ownership positions in key industrial sectors, such as the strategic petroleum sector (Statoil), hydroelectric energy production (Statkraft), aluminum production (Norsk Hydro), the largest Norwegian bank (DNB) and telecommunication provider (Telenor). The government controls 31.6% of publicly listed companies. When non-listed companies are included the state has an even higher share in ownership (mainly from direct oil license ownership).

After World War II, the Norwegian Labour Party, with Einar Gerhardsen as prime minister, embarked on a number of social democratic reforms aimed at flattening the income distribution, eliminating poverty, ensuring social services such as retirement, medical care, and disability benefits to all, and putting more of the capital into the public trust.

Highly progressive income taxes, the introduction of value-added tax, and a wide variety of special surcharges and taxes made Norway one of the most heavily taxed economies in the world. Authorities particularly taxed discretionary spending, levying special taxes on automobiles, tobacco, alcohol, cosmetics, etc.

Norway's long-term social democratic policies, extensive governmental tracking of information, and the homogeneity of its population lent themselves particularly well for economic study, and academic research from Norway proved to make significant contributions to the field of macroeconomics during this era. When Norway became a petroleum-exporting country, the economic effects came under further study.

Petroleum and post-industrialism

Oil-exporting country

Main article: Energy in Norway
Oil production, Norwegian sector; Source: Statistics Norway

In May 1963, Norway asserted sovereign rights over natural resources in its sector of the North Sea. Exploration started on 19 July 1966, when Ocean Traveler drilled its first well. Initial exploration was fruitless, until Ocean Viking found oil on 21 August 1969. By the end of 1969, it was clear that there were large oil and gas reserves in the North Sea. The first oil field was Ekofisk, produced 427,442 barrels (67,957.8 m3) of crude in 1980. Since then, large natural gas reserves have also been discovered.

Against the backdrop of the Norwegian referendum to not join the European Union, the Norwegian Ministry of Industry, headed by Ola Skjåk Bræk moved quickly to establish a national energy policy. Norway decided to stay out of OPEC, keep its own energy prices in line with world markets, and spend the revenue – known as the "currency gift" – wisely. The Norwegian government established its own oil company, Statoil, and awarded drilling and production rights to Norsk Hydro and the newly formed Saga Petroleum.

The North Sea turned out to present many technological challenges for production and exploration, and Norwegian companies invested in building capabilities to meet these challenges. A number of engineering and construction companies emerged from the remnants of the largely lost shipbuilding industry, creating centers of competence in Stavanger and the western suburbs of Oslo. Stavanger also became the land-based staging area for the offshore drilling industry. Presently North Sea is past its peak oil production. New oil and gas fields have been found and developed in the large Norwegian areas of the Norwegian Sea and the Barents Sea, including Snøhvit.

Reservations about European Union

Exports and imports in Norway

On 24 and 25 September 1972, the Norwegian parliament put to a referendum the question whether Norway should join the European Union. The proposal was turned down with a slim margin. The Norwegian government proceeded to negotiate a trade agreement with the EU that would give Norwegian companies access to European markets. Over time, Norway renegotiated and refined this agreement, ultimately joining the European Free Trade Association and the European Economic Area.

Although Norway's trade policies have long aimed at harmonizing its industrial and trade policy with the EU's, a new referendum in 1994 gave the same result as in 1972, and Norway remains one of only two Nordic countries outside the EU, the other being Iceland.

Although much of the highly divisive public debate about EU membership turned on political rather than economic issues, it formed economic policy in several important ways:

Norwegians have sought accommodations on a range of specific issues, such as products from fish farms, agricultural products, emission standards, etc., but these do not appear to differ substantially from those sought by bona fide EU members. It is expected that the issue of membership will be brought to a referendum again at some point.

Post-industrial economic developments

GDP growth 1865–2004
The Labour productivity level of Norway is one of highest in Europe. OECD, 2012

Several issues have dominated the debate on Norway's economy since the 1970s:

Economic structure and sustained growth

Norway Exports Tree Map (2009)

The emergence of Norway as an oil-exporting country has raised a number of issues for Norwegian economic policy. There has been concern that much of Norway's human capital investment has been concentrated in petroleum-related industries. Critics have pointed out that Norway's economic structure is highly dependent on natural resources that do not require skilled labor, making economic growth highly vulnerable to fluctuations in the demand and pricing for these natural resources. The Government Pension Fund of Norway is part of several efforts to hedge against dependence on petroleum revenue.

Norwegian exports in 2006

Because of the oil boom since the 1970s, there has been little government incentive to help develop and encourage new industries in the private sector, in contrast to other Nordic countries like Sweden and particularly Finland. However the last decades have started to see some incentive on national and local government levels to encourage formation of new "mainland" industries that are competitive internationally. In addition to aspirations for a high-tech industry, there is growing interest in encouraging small business growth as a source of employment for the future. In 2006, the Norwegian government formed nine "centers of expertise" to facilitate this business growth.[14] Later in June 2007, the government contributed to the formation of the Oslo Cancer Cluster (OCC) as a center of expertise, capitalizing on the fact that 80% of cancer research in Norway takes place in proximity to Oslo and that most Norwegian biotechnology companies are focused on cancer.[14]

Regional variation

Region GDP per capita 2013
in euros As % of EU-28 average
 European Union 26,700 100.0%
 Norway 49,300 184%
Richest Oslo og Akershus 51,800 194%
Agder og Rogaland 40,100 150%
Vestlandet 39,400 147%
Trøndelag 34,400 129%
Nord-Norge 32,400 121%
Sør-Østlandet 29,000 108%
Poorest Hedmark og Oppland 27,500 103%

Source:Eurostat[15]

Notes

  1. ↑ Arbeidskraftundersøkelsen - SSB. 23. September 2015
  2. 1 2 https://ssb.no/en/arbeid-og-lonn/statistikker/lonnansatt
  3. ↑ "Doing Business in Norway 2013". World Bank. Retrieved 2012-10-22.
  4. ↑ "Export Partners of Norway". CIA World Factbook. 2012. Retrieved 2013-07-23.
  5. ↑ "Import Partners of Norway". CIA World Factbook. 2012. Retrieved 2013-07-23.
  6. ↑ "Sovereigns rating list". Standard & Poor's. Retrieved 26 May 2011.
  7. 1 2 3 Rogers, Simon; Sedghi, Ami (15 April 2011). "How Fitch, Moody's and S&P rate each country's credit rating". The Guardian. Retrieved 31 May 2011.
  8. ↑ "International Reserves and Foreign Currency Liquidity - NORWAY". International Monetary Fund. 9 May 2011. Retrieved 31 May 2011.
  9. ↑ http://home.bi.no/a0310125/Bjornland_SJPE_1998.pdf
  10. ↑ http://www.offshorecenter.dk/filer/files/Project/Internationalisering/OCD%20report%20(Norway).pdf
  11. ↑ http://www.sv.uio.no/tik/forskning/publikasjoner/tik-artikkelserie/Ryggvik.pdf
  12. ↑ https://books.google.com/books?id=jZIOAAAAQAAJ&pg=PA221
  13. ↑ "The rich cousin". The Economist. 1 February 2013. Retrieved 1 February 2013.
  14. 1 2 Aldridge 2008
  15. ↑ http://appsso.eurostat.ec.europa.eu/nui/show.do?query=BOOKMARK_DS-513634_QID_-7680EC27_UID_-3F171EB0&layout=TIME,C,X,0;GEO,L,Y,0;UNIT,L,Z,0;INDICATORS,C,Z,1;&zSelection=DS-513634INDICATORS,OBS_FLAG;DS-513634UNIT,PPS_HAB;&rankName1=UNIT_1_2_-1_2&rankName2=INDICATORS_1_2_-1_2&rankName3=TIME_1_0_0_0&rankName4=GEO_1_2_0_1&sortC=ASC_-1_FIRST&rStp=&cStp=&rDCh=&cDCh=&rDM=true&cDM=true&footnes=false&empty=false&wai=false&time_mode=ROLLING&time_most_recent=false&lang=EN&cfo=%23%23%23%2C%23%23%23.%23%23%23

See also

References

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