Reportage | Norway

The energy kingdom

Economic Scenario by Emilio Fabio Torsello

Norway’s prosperous economy weathers crises

This is how Oslo overcame a world economic crisis: with one of the world’s top sovereign funds and an energy mix that enhances the various production areas

According to the CIA World Factbook, an objective annual report on the countries of the world, “The Norwegian economy is a prosperous economy with a vibrant private sector, a large state sector, and an extensive social safety net.” In part thanks to large reserves of untapped raw materials, Norway is one of the world’s strongest economies.

A linchpin of Europe, but not part of it

In November 1994, Norway decided through a referendum to stay out of the European Union, while also accepting to become a member of the European Economic Area. As such, it represents one of the major contributors to the EU budget.

Norway depends on a mix of raw materials and industry that makes it one of the strongest economies in Europe. In addition to resources like hydropower, fishing, forests and mines, the Norwegian oil sector is particularly important, generating 9% of the jobs in the country and contributing 18.6% to its GDP. Oil makes up 46% of Norwegian exports, making it one of the world’s major oil exporting countries, reaching its highest output in the early 2000s. However, Norway has suffered amid the falling price of crude oil in late 2015 and early 2016, the first consequence of which has been lowered investments in exploration of new deposits. Such activity is characterized by often high costs that can become prohibitive in harsh climates.

On the other hand, Norway’s tourist industry is highly developed, as the country’s natural landscapes draw visitors from around the globe throughout the year, especially cruise ships.

A solid economy in spite of the crisis

Moreover, in preparation for the possibility of a slowdown in petroleum and gas production, the Norwegian government decided in mid-2015 to put aside revenue from oil sales to create the world’s largest sovereign wealth fund, amounting to over 800 billion dollars. The fund will help balance the federal budget of a nation divided into 19 states. Also thanks to its oil revenue, Norway has boasted an average annual GDP of $98,000 per capita. As of today, the SWF is not receiving the volumes of money it once was but nonetheless manages to guarantee the country’s relative economic security.

Norway’s GDP has seen constant growth since the early 2000s, particularly between 2004 and 2007, while this growth slowed in 2008 (including in the aftermath of the global economic crisis) and even shrank in 2009. During the following 5 years, the GDP resumed growth, although more modestly than before.