19/12/2017 - The Norwegian economy is performing well, despite low oil prices. Further reforms will be needed to diversify the economy, improve public spending efficiency and ensure that today’s high levels of income, well-being and equality are passed on to future generations, according to a new report from the OECD.
The latest OECD Economic Survey of Norway points out that the accommodative monetary policy supporting growth has also contributed to house price increases and credit growth. The Survey recommends that Norway prepares a contingency plan against a possible hard landing in the housing and debt markets, including, as necessary, potential delays to planned monetary policy normalisation and targeted fiscal policy initiatives.
The Survey, presented in Oslo by OECD Deputy Secretary-General Mari Kiviniemi and Norway’s Finance Minister Siv Jensen, projects growth above 2% in 2018 and 2019. It identifies priorities for future public policy action, including reforms to facilitate the transition away from oil-related activities and seize the opportunities offered by globalisation and digitalisation. It proposes measures to improve the efficiency of public spending, in particular by ensuring maximum returns from planned transport infrastructure investment.
“It is no secret that Norway has among the highest material living standards in the world, both in terms of income and wider measures of inclusiveness and well-being, but this success is not simply the result of being a large oil producer,” Ms Kiviniemi said. “Norway has a very well-managed economy. The challenge going forward is to continue with public policies that ensure inclusive growth for future generations.”
To maintain macroeconomic stability, the Survey says Norway should stick with plans to bring its fiscal rule on budget deficits in line with new expectations of lower returns from the sovereign wealth fund. Keeping deficits at or below 3% of the value of the wealth fund, rather than the previous 4%, will require a shift from an expansionary to a neutral fiscal stance. Achieving this will require greater efforts to improve public spending efficiency, the Survey said.
To maintain a successful business sector and facilitate diversification across the economy, the Survey recommends Norway complete a planned programme of income-tax rate cuts and consider further reductions. It can also continue strengthening competition policy, reduce state stakes in businesses, strengthen routes to recovery in the insolvency regime and replace the taxi-licencing system.
Improving skills training, notably through greater use of apprenticeships, and taking measures to boost labour force participation, particularly through reforms to sick leave and disability benefits, will allow Norway to preserve its high levels of inclusiveness, the Survey said.
An Overview of the Economic Survey, with the main conclusions, is accessible at: http://www.oecd.org/eco/surveys/economic-survey-norway.htm.
For further information, journalists can contact the OECD Media Division (+33 1 4524 9700).
Working with over 100 countries, the OECD is a global policy forum that promotes policies to improve the economic and social well-being of people around the world.