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Page added on June 4, 2014
Norway must ‘prepare for life after oil’
The IMF has called on Norway to cut back on spending its oil income, saying the economy needs no further stimulus and the government should focus on fostering private sector growth instead as it begins the long transition to life after oil.
The budget has provided the economy with repeated stimulus even though it is running near capacity. The government needs to cut back, both to save the oil income and maintain a more neutral fiscal stance, the fund said.
“The upward trend in government consumption and investment, together with the increasing labor demand from the oil and gas sector … has crowded out and increased labor cost pressure in other exposed industries,” the IMF said after ending its annual consultation with Norway.
Norway has saved up its oil money in a fund now worth $870 billion, or $170,000 per man, woman and child, and will spend less than 3 percent of this sum this year, below its self-imposed 4 percent target.
Still, the actual amount it spends has risen because the oil fund has growth rapidly in recent years.
“We would urge a still more conservative use of the (oil fund’s) resources to maintain a more neutral fiscal stance so long as the economy remains near or above capacity,” it added.
Norway’s oil production peaked in 2000, and current output is less than half that year’s level.
As oil and gas investments ease up and then decline over the next several years, contributing less to growth, the government needs to prepare for a potentially rough transition, the IMF said.
It should curb sickness and disability benefits, complete pension reform, boost productivity, improve public services and ease trade restrictions, particularly in agriculture.
Finance Minister Siv Jensen said she had noted the IMF mission’s views but added: “At the same time I am also very concerned with how oil money is put to use. We should use it in a way that helps increase the productivity and growth potential of the economy.”
Although the IMF is projecting a smooth transition to a post oil economy, it said there was a risk it could be rocky as growth would be lower, possibly leading to disruption in the labor market.
Monetary policy, however, was just right after overcoming last year’s policy dilemma with surging house prices and super- low inflation, the IMF added.
“Relative to last year, many of the tensions … more or less abated,” Mission Chief Tom Dorsey said. “You seem to be at a goldilocks moment, when everything is sort of just right (for monetary policy).”
The IMF sees 2014 mainland growth, or excluding the oil sector, at 1.9 percent, broadly in line with the central bank’s 1.75 percent projection. It forecasts 2015 growth at 2.4 percent versus the bank’s 2.5 percent.
12 Comments on "Norway must ‘prepare for life after oil’"
Plantagenet on Wed, 4th Jun 2014 8:09 pm
So much for the oil curse—oil has made Norway wealthy. Even after the oil is gone Norway will have ca. one trillion dollars of investments, which will spin off 10-50 billion dollars in perpetuity.
peterjames on Wed, 4th Jun 2014 8:37 pm
Planet, once oil is gone, will a $1 trillion investment still be worth $1 trillion.
Makati1 on Wed, 4th Jun 2014 10:19 pm
peter, you see the future better than most here. Those ‘investments’ are only worth whatever is backing them, and likely that will also disappear in the near future. What good are stocks if they are worthless pieces of paper or ones and zeros in some no longer functioning computer system?
Did all of you market ‘investors’ have a heart attack when I said that? I felt the shock/denial blast wave all the way here in Manila. LMAO The only good investment is fertile land and things that can be used/traded after the dust settles. I doubt anyone will want shares of a company if it is permanently closed as most will be when the system goes down. 80+% of what they make are NOT necessities.
Can you imagine:
IBM —– worthless
Apple — ”
Walmart – ”
GM —— ”
Boeing — ”
GE —— ”
Ford —- ”
Citi —- ”
Goldman Sacs ”
Etc.
What will still have value? What you have in your hand and the real friends and family around you. Nothing more.
noobtube on Wed, 4th Jun 2014 10:39 pm
It is amazing how much faith people have in dollars.
There is no legal definition of a dollar anymore.
At this point, no investment is safe. 2008 should have taught the lesson but Americans are extremely hard-headed.
It boggles the mind that people just willingly accept that the biggest banks in the United States are total failures and getting bailed out by the government without any protests, any rioting, no looting, no shutdown off the streets, no rejection of the drive/shop/consume lifestyle, no abandonment of the political process (in fact the same scumbags who caused the mess keep getting re-elected)… ABSOLUTELY NOTHING!
Norway is as vulnerable to this system as any other. Once their oil runs out, they are finished. It is the only thing saving them, at this point from being yet another European basket case (I wonder if they’ll blame immigration, when the cheap energy is gone, like the other losers).
Northwest Resident on Wed, 4th Jun 2014 10:51 pm
noobtube — Nice post. But one point — not ALL Americans are extremely hard-headed, and not ALL Americans willing accepted that the biggest banks… No protests? What was Occupy Wall Street? And for a guy like me who must work and who must support a family and pay the bills OR ELSE, what could I have done? I am trapped by the system, noob, just like millions of other Americans. We can vote, we can post our dissent on blogs like this, we can bad-mouth the politicians who we don’t like and support the ones we think will make a difference, but what else can we do? It is the crooks and the elites at the top who have everything under control. What do you propose normal average Americans who disagree with bailing out the banks should do? Let’s hear your plan.
GregT on Thu, 5th Jun 2014 12:23 am
noobtube,
I suggest that you do a little bit of research on central banking. As is the case with all of your posts, you are pointing your finger in the wrong directions.
Nobody that ever got elected anywhere, is causing this mess.
Shaved Monkey on Thu, 5th Jun 2014 12:38 am
The only thing they can invest in is renewable energy and at least try and maintain their standards of living as best they can.
noobtube on Thu, 5th Jun 2014 1:13 am
By definition, Americans are hard-headed. They are exceptional after all. They don’t have to follow the rules of physics, nature, or mathematics.
They will defeat the exponential function.
They will overcome diminishing returns.
The American way of life is not negotiable.
The only solution is to no longer consider yourself American (who are doomed to extinction anyway), not to identify with them, and reject everything they believe and support.
Americans are at war with the Earth. I wonder who will win?
Some would rather be dead than not be American. So be it.
Juan Pueblo on Thu, 5th Jun 2014 8:26 am
Norway will get by for longer than most countries on Earth. However, at some point they will have to contract, too. As far as their oil fund investments go, I don’t think they will be worth much for long.
GregT on Thu, 5th Jun 2014 10:35 am
noob,
By definition, Human beings are hard-headed. We believe that we are exceptional. We believe that we don’t have to follow the rules of physics, nature, or mathematics. This is human nature.
Human beings do not understand the exponential function.
Human beings believe that they can overcome diminishing returns.
Human ways of life are not negotiable. At the expense of everything around us.
The only solution is to no longer consider ourselves as humans (we are all doomed to extinction anyways, as every species is), not to identify with human ways, to reject everything that humans believe and support, and return to living as the animals that we really are, within the confines of the natural environment.
Human beings are at war with the earth. There shouldn’t be any wonder as to who will win.
Human beings would rather be dead than to live as animals. So be it.
There, fixed it for you.
Northwest Resident on Thu, 5th Jun 2014 10:47 am
GregT — Excellent rewrite!
Davy, Hermann, MO on Thu, 5th Jun 2014 11:00 am
Great Idea NR/Greg….we can edit the filth out of the noobster comments making them both reasonable and acceptable to those with a brain and objectivity.