The Economist - quotes The new Nordic model isnot perfect. High trust in institutionsand political system – sofar… Norway is the odd man ofthe Nordics. Norway is embracingstate capitalism! Oiling the wheels ofwelfare…
Norway – the European rich cousinMarch 1999$ 15/BarrelOctober 2003$ 30/BarrelApril 2005$ 50/BarrelDes 2006$ 60/BarrelMarch 2011$ 90/BarrelNorway: At the right place at the right time:”on the back of China’s increasing demand for energy”
Results• A larger trade surplus• Higher growth rate• Slower employmentgrowth in themanufacturing industry• More demand for reformsand pressure to innovate• Higher immigrationGlobalization’s impact on Norway• Cheap import goods• Lower prices• Low interest rates• Pressure on wage growth• Increasing market priceson Norwegian exportcommodities• New export marketsThe NorwegianeconomyChina-effects1Increaseddomesticcompetition210 newEU countries3
Pros and cons with ”the Nordic Model”Pros Highly educatedpopulation Good welfare supportsystems Low unemployment rateand few conflicts at work. Advanced technology inworklife Little corruptionCons Large share of thepopulation between theage 16-67 is outside thelabour force. Increase in the number ofpeople with disability Higher taxes than otherOECD countries The marginal rate of returnon education is low.
Government’s economic policy The main objective ofthe Government’seconomic policy is tocontribute to highemployment, sustainabledevelopment, fairdistribution of incomeand well-functioningwelfare schemes.
Our ’cowboy’ finance minister:thank you Poland and Sweden!
World’s largest sovereign wealthfund386.63307.96262.30100020003000400050006000700020012002200320042005200620072008200920102011201220132014201520162017201820192020Source: Ministry of Finance. From the National Budget 2013.
The ”rule of thumb”Using only 4% of the oil or pension fund Why this rule ofthumb? The oil revenue shouldbenefit all generations Secure our exportindustries and keep wageincreases under control. Strategy against Progresparty goal of higherbudget deficits? Problems ahead? Politics and oil prices China falls back… European crisis worse Migration challengesgets more difficult… Sharp fall in propertyprices combined withglobal downturn
State capitalism – pragmatic? The state is the largestowner of privatecompanies in Norway, andowns more than 37 percent of total stock value atOslo Stock Exchange. Foreigners own about 25%of the stocks.
NASA cooperation with oil hub ”Curiosity” landed onMars i august 2012. Mars Institute with officein Stavanger, our oilcapital. Knowledge about drillingunder extreme conditions
Substituting oil with natural gas The production of oil had anupswing in the beginning of the1970s and until the turn of thecentury. Measured in volumesoil production reached its top in2000. The production of natural gashave largely compensated for theshortfall in oil.050,000100,000150,000200,000250,000300,000197119731975197719791981198319851987198919911993199519971999200120032005200720092011Peak oil or better days ahead?KondensatNGLGasOilSource: Statistics Norway
Challenges ahead... The Norwegian economyis likely to be faced withdifficult trade-offs in thedecades to come, such aschanges in the globaleconomy, immigration, our high level of cost andan ageing population.
Sayings…”typisk norsk å være god”Gro Harlem Brundtland, prime minister, Labour Party.before the Winter Olympics in Lillehammer 1994.” Norge er et lite land i verden…”Lars Korvald, prime minister, Christan Democrats, in 1972.Before the referandum about joining the European Union in 1972. Thepeople said No!
The investment strategy The Government Pension Fund has a very long investment horizon. Noclearly defined liabilities. These characteristics give the Fund a greaterability to absorb risk than many other investors. The strategy is to exploit the long investment horizon of the Fund andprofiting from risk premiums over time. The investment strategy isbased in assessments of expected return and risk in the long run andthe assumption that one has to accept a certain degree of risk toachieve a satisfactory expected return over time.
The new Norwegian government…Venstre 5% Høyre 30% KRF 5% FRP 15% Nordic Supermodel
The Nordic countries The Swedes live longer, but are often sick. The Danes die ealier, but are happiest in the world. The Finns have high unemployment, but the world’sbest school system. The Norwegians are the richest, but the childrenstruggle with maths!Source: Bertil Holmlund, Uppsala University, Sweden
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