The Norwegian Economy

Transcription

1 The Norwegian Economy NORINT Norwegian Life and Society Spring 2018 Hilde Karoline Midsem

2 Outline of today s lecture 1. Some facts 2. Production, trade and the history of oil 3. The labor market, standard of living and the public sector 4. Future challenges for the Norwegian economy 2

3 Norway: A wealthy nation GDP/capita among highest in the world. High GDP per capita High standard of living Low income inequality 3

4 But Norway has not always been rich A vast income growth last 50 years. 4

5 Norway s economic system Social democracy. Welfare state Combination free market activity/ large state ownership in key sectors. 5

6 Norway: Large economic zone Rights regarding the exploration and use of marine resources (UN) Source: Wikipedia/ 6

7 Production Trade Natural resources 7

8 Norway is rich on natural resources: Oil and natural gas Fish Waterfalls/electricity Metals/aluminium 8

9 Norway: An «open economy» Trade a key factor behind Norwegian economic growth Import consumer goods Export : natural resourcebased goods Norway: Exports and imports Billion kroner Total exports Total imports Oil and gas export Source: Statitstics Norway/NHO 9

10 Most important export-goods Most important import-goods Cars, trucks Industrial machinery Cellphones/computers and industrial machinery Clothes etc. 10

11 Important trading partners: Europe, USA and China Export: Main trading partners Billion kroner UK Germany Netherlands France Sweden Belgium USA Denmark China Polen Kilde: Thomson Source: Statstics Norway / NHO Import: Main trading partners Billion kroner Germany Sweden China USA Denmark UK Netherlands Polen France Italy Kilde: Thomson Source: Statstics Norway / NHO

12 The discovery of oil and natural gas in the late 1960s has had great impact on the Norwegian economy. 12

13 Norwegian contintental shelf A large source of income 1959: Finding of natural gass in Groningen Netherland led attention to the Nordic Sea maybe there could be oil? 1962: Phillips Petroleum applied for permission for exploration in the North Sea 1963: Norwegian Government proclaimed sovereignty over The shelf 1966: First well drilled in 1966 it was dry 1969: Ekofisk field: First discovery in 1969 oil adventure began. Source: petroleum directorate 13

14 The managing of the oil resource Statoil: 1972 Principle of 50 percent state participation in each production licence was established. Government aimed to build national knowledge and competence From the beginning: Moderate extraction in order to prevent «over heating» of the economy 14

15 Oil and natural gas: 13 % of total production Norway: GDP NOK 2015-billion. Four quarter sum Oil and Offshore production Mainland - prod Q Q Q Q Q Q Q GDP GDP Mainland-Norway GDP total Kilde: Statistisk sentralbyrå/thomson Datastream/NHO 15

16 The Oil Fund and The Budgetary Rule Established in 1990 Owned by the Norwegian people Primary purpose to finance the welfare state 2000: Budgetary Rule: Never use more than the long run projected interest return from the Fund (estimated to 3% of fund value) 16

17 The Oil Fund - investments all over the world Source: 17

18 Investments in the oil sector: Important source of demand for Norwegian business 18

19 and industry in Mainland-Norway is an important supplier to the petroleum sector Is this a problem? 19

20 Production in Mainland Norway Mainland Norway: GDP by industry Per cent Public sector 25 % Agriculture, fish and fish farming 3 % Manufacturing 9 % Electricity and water supply 3 % Construction 8 % Service production 52 % 20 Kilde: Thomson Datastream/DNB Markets Source: Statstics Norway / NHO

21 The labor market, household economy and the public sector 21

22 Iceland Japan Germany Norway UK USA Netherla Polen Austria Denmark Ireland Sweden EU (27) Finland Portugal France Italy Spain Greece OECD DNK SWE NOR Unemployment is low in Norway High share of employed women Unemployment rates June Per cent Employed persons In per cent of persons years Kilde: Thomson Source: Statstics Norway / NHO Kilde: Thomson Source: OECD ES17 / NHO Women Men 22

23 High share of employed women Womens participation in the labour market increased gradually after 1970s A result of a concious choice of the policy makers There was a demand for labor in the 70s Subsidised day-care for children Paid parental leave 23

24 SVN DNK CZE SVK NOR BEL FIN SWE AUT HUN IRL CHE LUX FRA NLD DEU KOR ISL EST GRC POL ESP NZL JPN AUS CAN ITA GBR PRT ISR USA TUR MEX CHL OECD-29 High standard of living. Income inequality is low High degree of trust in the population. OECD's How's Life Index Income inequality Gini coefficients. Disposable income ,60 0,50 0, Housing Education Income Source: OECD/FIN Dep PM 2017/NHO Social conn. Norway Health Work-life balance OECD avg. Job Personal safety Subjective well being 0,30 0,20 0,10 0,00 Kilde: OECD/Thomson Datastream/NHO 24

25 Norway: A nation of home owners 85% own the house they live in 25

26 House prices have grown dramatically last decades And so has household debt House prices to diposable income 1998Q4= Kilde: Thomson Source: OECD ES17 / NHO Household debt ratio Debt as percentage of disp. income jan.10 jan.11 jan.12 jan.13 jan.14 jan.15 jan.16 jan.17 Debt ratio Source: Norges Bank, PPR 2017-III/NHO 26

27 Reason to worry? Interest rates Changes in regulation on residential mortgage loans this year Some decline in housing prices last months 27

28 LUX NOR DNK AUT BEL FIN SWE FRA NLD CHE USA DEU ISL IRL ITA CAN GBR AUS OECD JPN SVN ESP NZL ISR PRT GRC CZE SVK HUN EST KOR POL LVA TUR MEX NOR DNK SWE FIN EST HUN FRA LVA ISR SVK BEL CAN OECD GRC SVN GBR CZE AUT ESP USA PRT IRL ITA NLD TUR LUX DEU CHE KOR JPN Large public sector Only Luxembourg spends more per capita. Highest employment share of all Government expenditures per capita 1000 PPP-USD Employed in gen. government Share of total persons employed Kilde: Thomson Kilde: OECD, Government At A Glance, 2017/NHO Kilde: Thomson Kilde: OECD, Government At A Glance, 2017/NHO 28

29 and the tax-level is relatively high 29

30 Where does the money go? Government expenditures Purpose. Pct. share Social protection Health Education Transport Other Source: Statistics Norway/NHO 30

31 GRC CHL KOR ITA SVN FRA MEX HUN USA ESP LVA EST PRT ISL JPN SVK POL GBR CZE OECD BEL AUT ISR AUS DNK SWE FIN DEU NZL IRL NLD TUR CAN NOR LUX CHE The population trust the government Conficence in the national government Per cent Trust is important for the success of a wide range of public policies that depend on behavioural responses from the public. Trust is necessary to increase the confidence of investors and consumers. Trust is essential for key economic activities, most notably finance. Trust in institutions is important for the success of many government policies, programmes and regulations that depend on cooperation and compliance of citizens. ( Kilde: Thomson Source: Gallup World Poll/OECD, Government At A Glance, 2017/NHO 31

32 Centralized wage bargaining LO : Largest union confederation NHO : Largest employers confederation Possible to respond quickly to cyclical changes in the economy The Scandinavian model for wage bargaining: The negotiation procedure is based on the principle that national wage growth should follow the wage growth in competitive export-sector. The competitive export sector (manufacturing industry) negotiates first 32

33 Norway The golden age won t last for ever Future challenges: 33

34 Oil sector will shrink. The population is getting older Lower oil price-level, lower production. Public expences on health care etc. will increase Petroleum sector 2013 = Production Kilde: Thomson Kilde: Finansdepartementet, PM17 & RNB17NHO Demand, %GDP ML (ha) Population by groups of age Per centage share Kilde: Thomson Source: Statistics Norway/NHO år år (ha) 90+ (ha)