OECD Development Co‑operation Peer Reviews: Norway 2019

Context of the peer review of Norway

Political and economic context

Norway’s current minority coalition government has been in power since 2013. The Conservative Party led by Prime Minister Erna Solberg and the Progress Party were re‑elected in October 2017 and in January 2018 the Liberal Party joined the coalition. In January 2019, the Christian Democratic Party, which has been a firm advocate for development assistance, also joined the government. Parliamentary elections are next scheduled for 2021.

Norway’s population of 5.3 million benefits from sustained economic growth. At USD 35 739 (US dollars), average annual household net-adjusted disposable income per capita is higher than the OECD average (OECD, 2016). The unemployment rate is relatively low having fallen from 4.6% in 2016 to 4.2% in 2017 and is expected to reach 3.7% in 2018 (OECD, 2018a). Satisfaction with the education system is the highest among all OECD countries, reaching 85% in 2016 – an increase from 77% in 2007, likely attributable to high levels of access to educational institutions and improvements in Programme for International Student Assessment (PISA) scores in all subjects (OECD, 2017). Refugee policies since 2015 have been relatively restrictive, with applications for asylum decreasing in recent years (Government of Norway, 2017). However, with 11.3 refugees per 1 000 inhabitants, Norway sits above the median for OECD countries (Center for Global Development, 2017).

The OECD projects steady 2.3% growth in real gross domestic product (GDP), above the 1.9% average for OECD member countries (OECD, 2018b). Forecast inflation remains low, around 2%, as compared to the OECD average of 2.4%. Norway’s fiscal balances have maintained a surplus in recent years, at 6.0% of GDP in 2015 and 3.1% of GDP in 2016 (OECD, 2017). Both government expenditures and government investment are also above the OECD average.1 Norway’s sustained economic prosperity is largely attributable to its well-managed petroleum resources, which have enabled the accumulation of a substantial sovereign wealth fund, the Government Pension Fund Global, while also financing fiscal deficits.2 In 2017, the government announced a revision to the fiscal rule, namely that fiscal budgeting be based on a 3% expected return on the Fund, instead of the 4% in place since 2001. This suggests an end to fiscal expansion and a degree of constrained public spending going forward (OECD, 2018c).

Development co-operation system

The delivery of Norway’s aid programme is largely shared between the Ministry of Foreign Affairs, the Ministry for Climate and Environment, the Norwegian Agency for Development Co-operation (Norad), Norway’s embassies, Norec (formerly FK Norway, responsible for facilitating exchanges between Norway and developing countries), and Norway’s development finance institution, the Norwegian Investment Fund for Developing Countries (Norfund). In 2017, the Ministry of Foreign Affairs was responsible for managing around 50% of Norwegian ODA, and the Ministry for Climate and Environment – which is responsible for Norway’s International Climate and Forest Initiative (NICFI) – for 8% of Norwegian ODA. Since 2016-17, the government has delegated increasing responsibility to Norad for the delivery of the aid programme. Norad’s responsibilities include the administration of support to health, education and climate and renewable energy programmes, private sector development, and support for civil society organisations. Norad administered around 28% of net ODA disbursements in 2017, up from 12% in 2016. A formal review and reform of the organisational arrangements and respective roles of Norad and the Ministry of Foreign Affairs commenced in 2018 and is ongoing.

This peer review looks at Norway’s efforts since 2013 to increase the impact of its aid and the efficiency of its distribution, while also being sensitive to these changes in the political, economic and administrative context.

References

Center for Global Development (2017), Commitment to Development Index 2017 (database), https://www.cgdev.org/cdi-2017/country/NOR (accessed on 12 November 2018).

Government of Norway (2017), Immigration and Integration 2016–2017 – Report for Norway, Norwegian Ministries, Oslo, https://www.regjeringen.no/contentassets/005e1d69ad5141958451b8770552dab9/immigration-and-integration-20162017.pdf.

OECD (2018a), Unemployment rate (indicator), doi: 10.1787/997c8750-en (accessed on 08 November 2018).

OECD (2018b), Real GDP forecast (indicator), doi: 10.1787/1f84150b-en (accessed on 25 November 2018).

OECD (2018c), OECD Economic Surveys: Norway 2018, OECD Publishing, Paris, https://doi.org/10.1787/19990383 (accessed on 25 November 2018).

OECD (2017), Government at a Glance 2017 – Country Fact Sheet: Norway, OECD Publishing, Paris, https://www.oecd.org/gov/gov-at-a-glance-2017-norway.pdf.

OECD (2016), “Better Life Index: Norway”, OECD Social and Welfare Statistics, OECD Publishing, Paris, http://www.oecdbetterlifeindex.org/countries/norway/ (accessed on 12 November 2018).

OECD (n.d.), Public Investment, OECD, Paris, http://www.oecd.org/gov/public-investment.htm.

Royal Norwegian Ministry of Finance (2013), National Budget 2013, Oslo, Norway, https://www.statsbudsjettet.no/Upload/Statsbudsjett_2013/dokumenter/pdf/NBudget_2013.pdf

Notes

← 1. Government expenditures were 48.8% of GDP in 2015 and 51.1% of GDP in 2016, compared to the OECD average of 40.9% of GDP in 2015 and 41.5% of GDP in 2016; government investment was 4.8% in 2015 and 5.3% in 2016, compared to the OECD average of 3.2% in 2015 and 3% in 2016. See OECD (2017) and OECD (n.d.), http://www.oecd.org/gov/public-investment.htm.

← 2.  The fiscal rule permits spending more than the expected return on the Fund in a cyclical downturn. Spending of petroleum revenues should be below the expected return when capacity utilisation in the economy is high. See also: Royal Norwegian Ministry of Finance (2013).