Why Norway is winning in a global marketplace? Chief Economist, Terje Strøm, NyAnalyse 15th of May 2013
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Why Norway is winning in a global marketplace?
Chief Economist, Terje Strøm, NyAnalyse
15th of May 2013
The next supermodel?
Kingdom of Norway Facts and figures
Norway’s black gold Small, transparent, open
economy
Free healthcare & highereducation
Women working and birth rates still high
Trust in political
system and the law.
Rather happy tax payers?
A global winner – rich and lucky
The Economist - quotes The new Nordic model is
not perfect.
High trust in institutionsand political system – so far…
Norway is the odd man ofthe Nordics.
Norway is embracingstate capitalism!
Oiling the wheels ofwelfare…
Norway – the European rich cousin
March 1999$ 15/Barrel
October 2003$ 30/Barrel
April 2005$ 50/Barrel
Des 2006$ 60/Barrel
March 2011$ 90/Barrel
Norway: At the right place at the right time:
”on the back of China’s increasing demand for energy”
Results• A larger trade surplus• Higher growth rate• Slower employment
growth in the manufacturing industry
• More demand for reforms and pressure to innovate
• Higher immigration
Globalization’s impact on Norway
• Cheap import goods• Lower prices• Low interest rates• Pressure on wage growth• Increasing market priceson Norwegian export commodities• New export markets
The Norwegian economyChina-
effects1
Increaseddomestic
competition2
10 newEU countries
3
Best ”terms of trade” since 1915
Pros and cons with ”the Nordic Model”
Pros
Highly educated population
Good welfare support systems
Low unemployment rate and few conflicts at work.
Advanced technology in worklife
Little corruption
Cons
Large share of the population between the age 16-67 is outside thelabour force.
Increase in the number of people with disability
Higher taxes than otherOECD countries
The marginal rate of return on education is low.
Government’s economic policy The main objective of
the Government’s economic policy is to contribute to high employment, sustainable development, fair distribution of income and well-functioning welfare schemes.
Our ’cowboy’ finance minister: thank you Poland and Sweden!
World’s largest sovereign wealth fund
386.6
3307.9
6262.3
0
1000
2000
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6000
7000
20
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Source: Ministry of Finance. From the National Budget 2013.
The ”rule of thumb” Using only 4% of the oil or pension fund
Why this rule ofthumb?
The oil revenue shouldbenefit all generations
Secure our exportindustries and keep wageincreases under control.
Strategy against Progresparty goal of higherbudget deficits?
Problems ahead?
Politics and oil prices
China falls back…
European crisis worse
Migration challengesgets more difficult…
Sharp fall in propertyprices combined withglobal downturn
Strong population growth, low uneployment
Top rankings - the Nordic countries
State capitalism – pragmatic?
The state is the largest owner of private companies in Norway, and owns more than 37 per cent of total stock value at Oslo Stock Exchange.
Foreigners own about 25% of the stocks.
NASA cooperation with oil hub ”Curiosity” landed on
Mars i august 2012.
Mars Institute with officein Stavanger, our oilcapital.
Knowledge about drilling under extreme conditions
THE WORLDS MOST ADVANCED OFFSHORE FLEET
LNG Gas = Snøhvit, Hammerfest
Substituting oil with natural gas The production of oil had an
upswing in the beginning of the 1970s and until the turn of the century. Measured in volumes oil production reached its top in 2000.
The production of natural gas have largely compensated for the shortfall in oil.
0
50,000
100,000
150,000
200,000
250,000
300,000
19
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Peak oil or better days ahead?
Kondensat
NGL
Gas
Oil
Source: Statistics Norway
Challenges ahead...
The Norwegian economy is likely to be faced with difficult trade-offs in the decades to come, such as changes in the global economy, immigration, our high level of cost and an ageing population.
Sayings…”typisk norsk å være god”
Gro Harlem Brundtland, prime minister, Labour Party.
before the Winter Olympics in Lillehammer 1994.
” Norge er et lite land i verden…”
Lars Korvald, prime minister, Christan Democrats, in 1972.
Before the referandum about joining the European Union in 1972. The people said No!
Norway’s success story…
The investment strategy The Government Pension Fund has a very long investment horizon. No
clearly defined liabilities. These characteristics give the Fund a greater ability to absorb risk than many other investors.
The strategy is to exploit the long investment horizon of the Fund and profiting from risk premiums over time. The investment strategy is based in assessments of expected return and risk in the long run and the assumption that one has to accept a certain degree of risk to achieve a satisfactory expected return over time.
Strategic Asset Allocation
Equity (60%)
America, Africa,Midlle-east 35%
Europe 50%Asia and
Oseania 15%
Bonds (35%-40%)
America, Africa, Middle-
east 35%
Europe 60%
Asia og Oseania
5%
Realestate (0%-5%)
Money never sleeps…
The new Norwegian government…
Venstre 5% Høyre 30% KRF 5% FRP 15% Nordic Supermodel
The Nordic countries The Swedes live longer, but are often sick.
The Danes die ealier, but are happiest in the world.
The Finns have high unemployment, but the world’sbest school system.
The Norwegians are the richest, but the childrenstruggle with maths!
Source: Bertil Holmlund, Uppsala University, Sweden
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