Abstract
Norway, one of the world's richest economies and the second largest oil exporter, has been a model of prudent economic management of resource wealth. Executive Directors commended the impressive economic performance, marked by sustained solid growth, low inflation, unemployment, and strong fiscal and external positions. They noted that countercyclical fiscal management was a key pillar of the strategy, and stressed the need to tighten fiscal and monetary policies, accelerate structural reforms, increase labor supply, restrain public expenditure, and move forward with privatization initiatives.
The following information has become available since the staff report (SM/00/286) was issued. This information does not change the thrust of the staff appraisal.
1. Growth in mainland GDP softened somewhat since mid-2000. Preliminary national accounts data for the third quarter of 2000 show that mainland output declined over the previous quarter in seasonally-adjusted terms by 0.4 percent. The decline, reflecting sluggish private consumption and weak mainland investment, remains consistent with the staff projection of growth of 1.9 percent in 2000. Overall GDP rose by 0.3 percent on account of the growth in offshore oil and gas activities and shipping.
2. The unemployment rate (at 3.3 percent) and the level of employment were unchanged in October 2000 from their level in September on the basis of seasonally-adjusted Labor Force Survey data.
3. Consumer price inflation in 2000 averaged 3.1 percent, the highest annual rate since 1991.
4. Domestic credit expansion continued to accelerate, reaching 12.7 percent in the year to November 2000.
5. The preliminary estimate of the external trade surplus in 2000 was about 16 percent of GDP compared with 7 percent of GDP in 1999, reflecting mainly higher oil prices that led to a near doubling of oil exports to about $25 billion. The current account surplus in the first ten months of 2000 was estimated at $16 billion or about 12 percent of GDP on an annualized basis.
6. The spot price of oil (U.K. Brent), after dipping to around $22 per barrel in late December, rose to $27 per barrel in recent days.
7. The krone was at the upper end of its implicit target range in relation to the euro in the third week of January 2001. The krone has appreciated by about 4 percent against the dollar and depreciated by about 1½ percent against the euro since the beginning of December 2000. Three-month interest rates have remained roughly constant in the same time period, with a widening of the short-term differential vis-à-vis the euro area from 2.3 to around 2.6 percentage points.
8. The cabinet announced plans for partially privatizing the oil sector. It proposed an initial public offering of between 10 and 25 percent of Statoil shares in mid-2001 and selling roughly 20 percent of the total value of the State Direct Financial Interest (SDFI).