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.
The sharp oil price slump in 2014–15 hurt Norway’s oil and gas sector, with spillover effects on supporting industries across the supply chain. Mainland growth fell to its lowest level since the 2008/09 crisis at only 0.9 percent in 2016. However, the economy turned the corner in late 2016, supported by domestic demand, with unemployment falling from summer’s peak. Meanwhile, house price inflation accelerated to double digits in the second half of 2016, resulting in a further build-up of imbalances. Productivity growth has been low since the mid-2000s and labor force participation rates are falling, particularly for men and the young, in the face of aging.
As demand grows stronger and capacity constraints relax further, unemployment rate was expected to gradually decline to just below 4 percent by 2018. Inflation is projected to edge down further in pace with the unwinding of krone depreciation, before converging to the target over the medium term as trading-partner inflation rises.
The baseline outlook was subject to external risks of weaker than expected global growth, which could delay the recovery of non-oil exports; re-emergence of European bank stress and policy uncertainties in Europe, which could increase financial market volatilities and lead to liquidity strains in banks with high dependence on wholesale funding; and lower energy prices, which could weigh on the recovery. On the domestic side, the risks of ineffective integration of immigrants and refugees to productive employment could hinder the progress of economic transition. A substantial correction of house prices could dampen consumption and corporate earnings, creating negative spillovers on banks’ balance sheets.
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 $457 billion by the end of December 2009. The fund is primarily designed to help finance government programs once oil and gas resources become depleted.
Norway enjoyed large foreign trade surpluses thanks to high oil prices. Although Norway's unemployment rate has had a slight increase due to the international credit crisis, it still remains low (3.3% end 2009). 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. Continued recovery and moderate growth was expected to continue in 2010.
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. 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.
In the field of international economic co-operation the Norwegian government has actively backed the establishment of an international trading régime based on a set of rules. As a small country with significant export interests Norway has worked for a more open world trade within the framework of a multilateral body of rules. This applies not only to trade but also to the carriage of goods. Norway is one of the world's leading shipping nations. But the Norwegian fleet is mainly engaged in trade between third countries and is thus dependent upon free access to foreign markets.
The Norwegian authorities play an active part in international economic fora for co-operation such as the OECD and the World Trade Organization (WTO). Membership in the OECD has assumed increasing importance on account of the organisation's role as a source of important background material for the formulation of Norwegian policies. The WTO administers the central multilateral body of rules for international trade. Its work for the continued dismantling of customs and non-tariff barriers is of great importance to Norway since it can contribute towards a more open and predictable system of trade.
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