Prepared by Natalia Koliadina.
At current levels of oil production, a sustained 10 percent decline in oil prices would reduce the overall current account surplus by 1 percentage point of GDP. For the longer run, official calculations of the net present value of oil wealth were adjusted downward by about 10 percent in response to the decline in oil prices that took place in the first eight months of 1998, because the authorities considered that much of the previous increase in oil prices and some of the subsequent decline were temporary, and also because some oil production and exports was postponed to future years.
Exports of refined petroleum products constituted almost 2 percent of GDP in 1997, and were found to be highly correlated with oil and natural gas production.
Average foreign trade prices are based on countries’ 1987-89 composition of trade in manufactured goods and commodities, using world price indicators.
The result of the F-test shows that the null hypothesis of the same coefficient on foreign prices and dollar-kroner exchange rates cannot be rejected.
The null hypothesis of foreign prices and the exchange rate having the same coefficient cannot be rejected at the 5 percent level.
The projections of the real effective exchange rate based on relative wages assume a constant nominal exchange rate on an inverted ECU index, and slightly faster wage growth in Norway than in trading partners over the next two years.
Based on an inverted ECU index.
The dollar-NKr nominal exchange rate is fixed for 1999-2002 to avoid the effects of its changes on the Norway’s current account balance, since trade with the United States is not significant—less than 7 percent on both export and import sides.
This component includes non-oil investment income net of returns on the State Petroleum Fund, current transfers and net wages.