OSLO — Blessed with large petroleum reserves, Norway is riding a wave of prosperity brought by high oil prices and robust public finances while the rest of Europe is mired in a debt crisis.
This Scandinavian nation of 4.9 million is the biggest oil producer and exporter in western Europe, with most of the oil production taking place offshore in the North Sea. Norway was also the world’s second largest exporter of natural gas after Russia last year, when crude oil, natural gas and pipeline transport services made up nearly 50% of its exports value.
“We’re a commodity-based economy,” said Snorre Evjen, senior economist at Fokus Bank, in a recent interview in his office overlooking the Parliament building in Oslo. “It all stems from the oil price and the strong terms of trade. Export prices have increased substantially, while import prices have remained fairly stable.”
To make sure future generations also benefit from the oil resources first discovered in 1969 and which will eventually run out, Norway saves petroleum revenues in a pension fund valued at roughly $550 billion. The so-called 4% fiscal rule limits the swings in the Norwegian economy; under the rule, the government aims to spend only 4% of the pension fund annually, though the exact percentage can vary.
“The country’s finances are solid,” Evjen said. “We don’t have net debt. That’s why Norwegians don’t worry too much.”
The budget surplus was more than 10% of gross domestic product last year, and unemployment is currently 3.3%. The mainland economy, which excludes oil and shipping, is expected to grow 3.3% this year and 4% next year after growth of 2.2% in 2010, the OECD estimates.
Norway’s population is also increasing rapidly, driven by labor immigration from Sweden, Poland and the Baltic nations, as newcomers are attracted by high wages and the low unemployment rate. Norway is part of the European Economic Area and participates in the European Union’s single market, but it’s not an EU member after two failed attempts by referendum to enter the union. As a result, the nation benefits from the free movement of goods and labor, but has its own monetary policy and currency