The Norwegian GDP recently posted surprisingly strong growth in the second quarter, defying the recurrent warnings of an imminent economic downturn.
The Norwegian economy grew faster than analysts had predicted for the second quarter this year, according to figures from the official statistics agency. Output from the mainland – excluding the important petroleum sector – increased by 1.2 percent, compared with the predicted 0.8 percent. The upswing, much due to increased electricity production, starkly opposed the regular predictions of recent years that the economy would inevitably stagnate or decline.
There has been only a minimal notice of the global economic downturn in the oil-fueled economy. Unemployment rates have hovered just slightly above 3 percent for the last 5 years, sharply contrasting those of Norway’s Scandinavian neighbors. Unique among European nations is the substantial surplus in the government budget (last year eclipsing $40 billion) as well as the $880 billion large sovereign wealth fund (known as the oil-fund), which has drawn attention with its high-profile property purchases in London and New York in recent years.
The oil riches, or rather the sober managing of the regular surplus, has undoubtedly sheltered Norway from global currents – but also helped to isolate Norway from the rest of Europe. Public support for full EU membership – only narrowly defeated on two referendums – is today at an all-time low. While the EEA agreement effectively ties Norway to most of Brussels regulations, the country remains outside the EU.
In a country where key political differences are often about how much and where to spend the oil money, people are aware of their fortunate situation – and fearful of how long it will last. In 2012 economists warned that growth would soon slow as exports to the Europe were expected to stall. Last year sharply falling housing prices were seen as an ominous sign, and earlier this year Norwegian economists warned that steady unemployment rates were likely to hit European levels soon, based on a decline in job postings. But neither scenario has materialised yet.
The regular gloomy forecasts are, however, all based on a single inescapable fact: much of Norway’s prosperity originates in the huge petroleum reserves off the long Norwegian coast, reserves that are bound to run dry at some point. Although there have been surprising discoveries in “mature” production regions in recent years, the oil production peaked around the turn of the millennium and has steadily decreased since then.
Norwegian politics is today filled with discussions on how to cut down on generous state subsidies to increase productivity, and how to “normalize” the economy for the years to come. Ironically, the wealthiest Scandinavian country is frequently looking at Sweden and Finland and their industrial ingenuity as examples to follow when the petroleum stops flowing.
