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© 2007 International Monetary Fund
June 2007
IMF Country Report No. 07/196
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2007 Article IV consultation with Norway, the following documents have been released and are included in this package:
the staff report for the 2007 Article IV consultation, prepared by a staff team of the IMF, following discussions that ended on March 26, 2007, with the officials of Norway on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on May 10, 2007. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF;
a staff supplement of May 30, 2007 updating information on recent developments;
a Public Information Notice (PIN) summarizing the views of the Executive Board as expressed during its June 4, 2007 discussion of the staff report that concluded the Article IV consultation; and
a statement by the Executive Director for Norway.
The document listed below has been or will be separately released.
Selected Issues Paper
The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.
To assist the IMF in evaluating the publication policy, reader comments are invited and may be sent by e-mail to publicationpolicy@imf.org.
Copies of this report are available to the public from
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Price: $18.00 a copy
International Monetary Fund
Washington, D.C.
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INTERNATIONAL MONETARY FUND
NORWAY
Staff Report for the 2007 Article IV Consultation
Prepared by Staff Representatives for the 2007 Consultation with Norway
Approved by Juha Kähkönen and Adnan Mazarei
May 10, 2007
Executive Summary
Against a backdrop of strong growth and tightening capacity constraints, the discussions focused on policy requirements for continued noninflationary growth, longer-term fiscal sustainability, and key structural issues.
The authorities and staff agreed that further interest rate increases are warranted to head off inflationary pressures. The financial sector appears to be in good health, but risks have risen. The supervisor is closely monitoring the situation, although its scope for action is limited by the possibility that foreign bank subsidiaries will, if pressed, switch to branches, which would not be supervised by Norway.
Staff welcomed that the relevant fiscal deficit would, for the first time, be 4 percent of Government Pension Fund (GPF) assets. It was agreed that the deficit should be held below this benchmark until demand pressures ease. To manage increasing petroleum revenues, staff recommended tax cuts rather than spending increases, (current policy is to keep the revenue-GDP ratio at the 2004 level), and a medium-term fiscal framework, although the authorities viewed the existing fiscal guidelines as fulfilling this role.
Staff welcomed the recent parliamentary agreement on pension reform, and the intention to pursue complementary reforms. Staff argued that further reform should be considered to ensure long-term fiscal sustainability.
Norwegian labor markets perform well, but it was agreed that the challenge of the growing sickness and disability schemes was a high priority. The mission argued for continued aggressive enforcement of competition law, and that the strong governance system for state-owed enterprises be maintained and further privatization considered.
Data are adequate for surveillance, and in some instances very strong by international comparison. An improved labor force survey and an establishment survey would enhance the analysis of labor market developments.
Contents
I. Background
II. Report on the Discussions
A. The Outlook
B. Monetary Policy
C. The Financial System
D. Fiscal Policy
E. Structural Policy
III. Staff Appraisal
Boxes
1. Labor Inflows and Inflationary Pressure
2. Non-Oil Budget Deficit Path Under the 4-percent Rule
3. Pension Reforms
Figures
1. Economic Growth Indicators
2. Cyclical Indicators
3. Inflation Developments
4. External Developments
5. Exchange Rate Developments
6. Monetary Conditions
7. Financial Sector Indicators
8. Fiscal Indicators
9. Employment and Participation Rates
Tables
1. Selected Economic Indicators, 2002–08
2. External Indicators, 2002–12
3. Recent Fund Staff Recommendations and Implementation
4. The Core Set of Financial Soundness Indicators for Deposit Taking Institutions, 1999–2006
5. Financial System Structure, 1999–2006
6. The Encouraged Set of Financial Soundness Indicators, 1999–2006
7. Key FSAP Recommendations and Implementation
8. Fiscal and Monetary Indicators, 2002–07
9. General Government Financial Accounts, 2002–07
10. Indicators of External and Financial Vulnerability, 2002–06
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INTERNATIONAL MONETARY FUND
NORWAY
Staff Report for the 2007 Article IV Consultation—Informational Annex
Prepared by the European Department
May 10, 2007
Contents
I. Fund Relations
II. Statistical Issues
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INTERNATIONAL MONETARY FUND
NORWAY
Staff Report for the 2007 Article IV Consultation
Supplementary Information
Prepared by the European Department
Approved by Juha Kähkönen and Adnan Mazarei
May 10, 2007
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Public Information Notice (PIN) No. 07/65
FOR IMMEDIATE RELEASE
June 7, 2007
International Monetary Fund
700 19th Street, NW
Washington, D. C. 20431 USA
