ECONOMY
Norway is one of the world's richest countries in per capita terms. It has an important stake in promoting a liberal environment for foreign trade. Its large shipping fleet is one of the most modern among maritime nations. Metals, pulp and paper products, chemicals, shipbuilding, and fishing are the most significant traditional industries.
Norway's emergence as a major oil and gas producer in the mid-1970s transformed the economy. Large sums of investment capital poured into the offshore oil sector, leading to greater increases in Norwegian production costs and wages than in the rest of Western Europe up to the time of the global recovery of the mid-1980s. The influx of oil revenue also permitted Norway to expand an already extensive social welfare system. Norway has established a state petroleum fund that exceeded $388 billion by the end of December 2007. The fund is primarily designed to help finance government programs once oil and gas resources become depleted. Norway is currently enjoying large foreign trade surpluses thanks to high oil prices. Unemployment remains low (2.1% range), and the prospects for economic growth are encouraging thanks to the government's expansionary fiscal policy. As yet, the country does not have a significant industrial or manufacturing base, and in banking and financial services, the country is in the process of liberalizing and consolidating the industry. Norway's restricted labor market has limited the country's ability for mainland growth, although growth in the service sector has been stronger than in manufacturing. Labor costs have increased at a rate higher than its major trade rivals, causing a continued loss in Norway's competitive advantage. The Organization for Economic Cooperation and Development (OECD) has applauded Norway's strong economy, with growth expected to continue into 2008.
Norway voted against joining the European Union (EU) in a 1994 referendum. With the exception of the agricultural and fisheries sectors, however, Norway enjoys free trade with the EU under the framework of the European Economic Area. This agreement aims to apply the four freedoms of the EU's internal market (goods, persons, services, and capital) to Norway. As a result, Norway normally adopts and implements most EU directives. The present government has agreed not to open the question of full membership in the EU during the 2005-2009 legislative term. Norwegian monetary policy is aimed at maintaining a stable exchange rate for the krone against European currencies, of which the euro is a key operating parameter. Norway is not a member of the EU's Economic and Monetary Union and does not have a fixed exchange rate. Its principal trading partners are in the EU; the United States ranks sixth.
Energy
Resources
Offshore hydrocarbon deposits were discovered in the 1960s, and development began in the 1970s. Production increased significantly in the 1990s as new fields come on stream. The growth of the petroleum sector has contributed significantly to Norwegian economic vitality. Current petroleum production capacity is approximately 2.4 million barrels per day. Production in gas has increased rapidly during the past several years as new fields are opened, with crude oil production in decline. Total production in 2006 was about 248 million cubic meters of oil equivalents, approximately 50% of which was crude oil. This represented a decline in crude oil production over the past year, accompanied by sharp increases in gas and liquefied natural gas (LNG) production. Hydropower provides nearly all of Norway's electricity, and all of the gas and most of the oil produced is exported.
Norway is the world's fifth-largest oil exporter and third-largest gas exporter, providing much of western Europe's crude oil and gas requirements. In 2006, Norwegian oil and gas exports accounted for over 50% of total merchandise exports. In addition, offshore exploration and production have stimulated onshore economic activities. Foreign companies, including many American ones, participate actively in the petroleum sector.
Petroleum resources are expected to become less abundant and less commercially exploitable over time and may be reaching a plateau. However, innovative use of extraction technologies has extended the lives of fields far beyond their expected closures. Declines in petroleum extraction revenue may be offset by increased revenue from the extraction of natural gas. For example, Norwegian natural gas production is projected to increase through new and existing fields, such as Snohvit and Troll. Note, however, that Snohvit's production has been severely affected by significant technological setbacks, including a cessation of operations in March 2008. Given that the energy industry affects virtually every sector in the economy, diversification remains Norway's greatest challenge.
GDP (2007): $391 billion.
Annual growth rate (2007): 3.5%.
Per capita GDP (2006): Purchasing power parity $55,600.
Natural resources: Petroleum, natural gas, iron ore, copper, lead, zinc, titanium, pyrites, nickel, fish, timber, hydropower.
Arable land: 2.7%.
Agriculture: Products--dairy, livestock, grain (barley, oats, wheat), potatoes and other vegetables, fruits and berries, furs, wool, pork, beef, veal, fish.
Industry: Types--petroleum and gas, food processing, shipbuilding, pulp and paper products, aluminum, ferroalloys, iron and steel, nickel, zinc, nitrogen, fertilizers, petrochemicals, hydroelectric power, refinery products, timber, mining, textiles, fishing, transport equipment, electronics.
Trade (2006): Exports (f.o.b.)--$125.5 billion. Major markets: U.K. 26.8%, Germany 12.3%, Netherlands 10.2%, France 8.3%, U.S. 5.7%, Sweden 6.3%. Imports (f.o.b.)--$64.1 billion. Major suppliers: Sweden 15.0%, Germany 13.3%, Denmark 6.7%, U.K. 6.3%, China 5.5%, U.S. 5.3%, France 3.8%).
GDP by activity (2006): Agriculture, hunting, forestry, fishing, and fish farming--1.3%; oil and gas extraction incl. services and mining and quarrying--25.2%; manufacturing--8.42%; electricity, gas, and water supply--2.4%; construction--4.1%; wholesale and retail trade, motor vehicle repair, hotels and restaurants--8.8%; transport industries--4.9%; post and telecommunications, financial intermediation, dwellings, business services--17.1%; public administration and defense--3.8%; education, health and social work, and other social and personal services--13.7%.
