Norwegian experiences in balancing economic development with macroeconomic stability: A historical perspective

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1 Norwegian experiences in balancing economic development with macroeconomic stability: A historical perspective Governor Svein Gjedrem New Delhi March Chart Main characteristics of the Norwegian economy. Petroleum is important Per cent Value added in petroleum sector (% of GDP). Number of employees (% of total number of employees). Exports of petroleum (% of total exports). Open economy Imports (% of GDP) 7.8 Exports (% of GDP). Large government Current expenditures (% of GDP Mainland-Norway).7 Number of employees (% of total number of employees, ). Fiscal budget surplus (% of GDP, ) ). Capital in Government Pension Fund Global (% of GDP) 7. ) Figures from National Budget and Amendments to Budget for Sources: Ministry of Finance, Statistics Norway and

2 Chart Terms of trade Index...8 Norway, incl. oil.8. Mainland Norway. Denmark Finland Sweden Sources: Statistics Denmark, EcoWin, Statistics Finland and Statistics Norway Chart Norwegian commercial fleet 8-9 Thousand gross tons Source: Statistics Norway

3 Chart Industry structure Value added in different industries in per cent of GDP Services Manufacturing Primary industries Sources: Grytten (), Statistics Norway and Chart Gross fixed capital formation In per cent of gross domestic product Norway India Sources: Grytten (), Statistics Norway and World Bank

4 Chart Size of the general government Current expenditures ) Share of total demand ) ) In per cent of nominal GDP Mainland Norway ) General government consumption and gross fixed investment in per cent of total demand Sources: Statistics Norway Chart 7 Inflation in the Norwegian economy ) Per cent 8 8 Inflation target ) Annual rise in consumer prices (CPI). CPI adjusted for tax changes and excluding energy products from Sources: Statistics Norway and

5 Chart 8 Baseline scenario in Inflation Report / Estimated inflation ) and output gap Per cent Sight deposit rate Per cent Inflation - Output gap ) Rise in CPI-ATE: Consumer prices adjusted for tax changes and excluding energy products Sources: Statistics Norway and Chart 9 Challenges to an oil economy Lessons from Spain in the s ) Spain, in other words, became (or stayed) poor because it had too much money. The nations that did the work learned and kept good habits, while seeking new ways to do the job faster and better. The Spanish, on the other hand, indulged their penchant for status, leisure and enjoyment ( ). Easy money is bad for you. It represents short-run gain that will be paid for in immediate distortions and later regrets. ) David Landes: The wealth and poverty of nations

6 Chart Petroleum production in Norway ) Millions Sm o.e. Gas production Oil production Projections ) Including reserves and contingent resources in fields and discoveries. Not including undiscovered resources Source: Norwegian Petroleum Directorate Chart Management of petroleum wealth Petroleum wealth Under the seabed Financial assets Government Pension Fund Global - Diversify risk

7 Chart Government petroleum revenues and revenue spending. USD billions ) Petroleum revenues Spending ) NOK/USD exchange rate as of March Sources: Ministry of Finance and Chart Petroleum activities in ) MAINLAND NORWAY Transfers to the Fiscal Budget ($ bn) PETROLEUM ACTIVITIES Net cash flow ($ bn) GOVERNMENT PENSION FUND GLOBAL Export value oil and gas ($8 bn) Interest and dividends ($9 bn) Investments abroad ($ 8 bn) FOREIGN MARKETS ) NOK/USD exchange rate as of March Source: Ministry of Finance (National Budget and Amendment to the Budget ) 7

8 Chart The Government Pension Fund Global Per cent of mainland GDP Sources: Ministry of Finance and Chart Pension payments and the return on the Government Pension Fund Per cent of mainland GDP Pensions Return on the Government Pension Fund - Global 8 8 Sources: Ministry of Finance and 8

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