Even if it is
hard to believe, there is at least one European country to envy for being rich:
it’s the case of Norway. This country of prosperity and with a high standard of
living is in a very complicated situation.
While many
European countries are facing the economic crisis and have to reduce their
spending, Norway has another sort of problem to solve. Actually, its sovereign
wealth fund has reached 570 billion euros, thanks to its oil wealth. Now, as
the largest sovereign wealth fund in the world, it is trying to spend its money
on efficient projects that will bring positive results, avoiding damaging its
economy in the long run. Of course, the aim is to maintain its generous welfare
state, which is financed by oil revenues placed in a fund since the late 90’s.
In order to
avoid overheating, Norway’s fund invests outside its borders in stocks, bonds
and real estate. Due to the fact that the government can’t withdraw more than
four per cent a year the fund’s growth is constantly ensured and the budget is
balanced.
The election
campaign held in September was also dominated by welfare issues. It became the
potential point of dispute between two possible coalition partners, the
Conservative and the Progress party. While the Progress party pushes for more
spending from the fund, the Conservative party, that won the election, wants to
carry out a responsible economic policy. On the end, it seems that the leaders
will have to reduce taxes and increase spending on welfare. Namely, despite its
wealth, Norway has dilapidated schools and neglected infrastructure, like neglected
roads.
Considering the
welfare of Norwegians, it is one of the rare countries where almost the whole
population is fully employed and where the workers are twice as expensive as
those in other European countries.
On the other
hand there is a Dutch disease danger. An increase in revenues from natural
resources makes Norway’s non-oil economy uncompetitive. In order to avoid
Netherlands’ bad experience, Norway has to focus on its economy
diversification, by diminishing its reliance on oil revenues.
What seems to be
an incongruous problem for European countries deeply impacted by their national
debts, high unemployment rate and austerity politics, presents a real challenge
for Norway. The solution must be found by the future coalition. One thing is
for sure, the new government has to meet everyone’s expectation. It must serve
the interest of future generations and at the same time avoid Norwegian economy
destabilisation, which could be provoked by excessive public money injection.
Wednesday, 30
0ctober 2013
Source: http://www.businessinsider.com/norway-has-more-money-than-it-knows-what-to-do-with-2013-9http://www.economist.com/news/business/21586268-changes-norways-gigantic-sovereign-wealth-fund-will-be-felt-around-world-more-money
Sanja V.
Your article is very interesting, but i disagree with you concerning the "Dutch disease danger".
ReplyDeleteI went to Norway this summer and I had the opportunity to discuss with both an economic teacher and a CEO working for an oil rig. Norway's wealth does not come from nowhere! Yes the country has huge oil resources, but it also has a lot of water. In this way, Norway's energy consumption is produced thanks to dams. Thus, 99% of its oil resources is for selling. So, contrary to countries like Russia, Norway has time before being in need of diversify its economy.
Moreover, don't you think that, in the short term, making use of its raw material advantage is the best solution for Norway to overcome the current economic crisis?
Lisa N.
Yes, of course. But politicians and economic experts( at least those in articles) say that there is a risk of Dutch disease, because its economy is less competitive compared to other countries. That's what happened in the Netherlands.
ReplyDeleteOtherwise, almost no one believes in the possibility of Norway economic crisis, thanks to the responsible politicians. Namely, Norwegians have always served, or at least should serve as an example to other countries. And one thing is for sure- prevention is better than cure.