OECD ECONOMIC SURVEY OF NORWAY 2019 Sustaining wellbeing and employment Oslo, Monday 9 December 2019 http://www.oecd.org/economy/norway-economic-snapshot/
OECD Economics OECD
KEY MESSAGES • Continued vigilance is needed given the heightened uncertainty from global developments and domestic risks stemming from property markets. • Managing narrower fiscal space requires better value for money in public spending. • Policy needs to better facilitate and motivate employment as to strengthen inclusiveness and economic potential. 2
GDP growth is robust Real mainland GDP
Y-o-Y % change 3 2.5 2 1.5 1 0.5 0
2013
2014
2015
2016
2017
2018
2019 3
Growth will ease in the coming quarters Mainland GDP growth will be around 1.7% by 2021 (Annual growth rates, unless specified)
Mainland GDP Private consumption Government consumption Gross fixed capital formation Exports of goods and services Imports of goods and services Unemployment rate (% of labour force) Consumer price index
2018
2.2 1.9 1.4 2.8 -0.2 1.9 3.8 2.7
2019
2.5 1.8 2.2 4.3 1.6 5.45 3.4 2.3
2020
2.0 1.9 1.9 3.3 2.6 1. 3.2 2.0
2021
1.7 1.9 1.8 2.1 3.1 2.0 3.2 2.2
4
Living standards remain high GDP per capita, U.S. dollars, purchasing-power parity basis 80 70 60 50 40 30 20 10 0
5
Well-being is high Norway’s ranking amongst OECD countries
Top OECD performer
Bottom OECD performer Greece Jobs and earnings Israel Housing Mexico Work-life balance Lithuania Health status Mexico Education and skills Korea Social network Chile Civic engagement Turkey Environmental quality Mexico Personal security Portugal Subjective well-being
Norway: 9
Iceland Norway: 2 United States Switzerland
Norway: 14 Norway: 8 Norway: 15
Switzerland Finland
Norway: 8 Norway: 15
Iceland Australia
Norway: 2
Iceland Norway
Norway: 3
Denmark
6
Inequality remains low Norway ranking amongst OECD countries
Top OECD performer
Bottom OECD performer Mexico Gini (disposable income) Chile Gini (gross income) Chile P90/P50 disposable income decile ratio Korea P50/P10 disposable income decile ratio France Poverty rate before taxes and transfers United States Poverty rate after taxes and transfers
Norway: 7
Slovak Republic
Norway: 7
Slovak Republic
Slovak Republic Norway: 2 Norway: 5
Czech Republic Switzerland
Norway: 14 Norway: 6
Iceland
7
MACROECONOMIC AND FISCAL MANAGEMENT
8
House prices continue to rise Nominal house price index, 2010 = 100, seasonally adjusted
200 180
Oslo
Norway
160 140 120 100 80 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
9
Commercial real estate prices are rising steeply Estimated real selling prices per square meter for prime office space in Oslo, index 1998=100
10
Non-oil deficits can no longer increase rapidly Non-oil deficits and projection of 3 percent of the value of the oil fund % of trend mainland GDP 12
Structural non-oil deficit
3 percent path
10 8 6 4 2 0
2000
2010
2020
2030
2040 11
Recommendations for macroeconomic stability and fiscal management • Keep the policy rate on hold, while remaining vigilant to changing circumstances. • Renew macroprudential mortgage regulations when they expire, consider removing time limitations. • Reduce tax concessions on homeownership. • Apply the fiscal rule conservatively over the longer term, keeping structural deficits below the 3% path in the near term. • Strengthen value for money in public spending. 12
MAINTAINING HIGH EMPLOYMENT
13
Labour force participation has been falling Labour force participation rate, 15-64 years %
84
Norway
Average of top 5 OECD countries
83 82 81 80 79 78 77 76
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
14
Sickness absence from work is high Sickness absences of full-time dependent employees, average number of days per year, 2018 Days 25 20 15 10
0
GRC TUR HUN LTU USA ITA LVA ISL IRL CAN EST GBR SVK CHE POL DNK LUX OECD NLD CZE AUT ESP SWE SVN FRA BEL DEU PRT FIN NOR
5
15
A substantial share of the population is on disability benefit Disability benefits recipients, % of population aged 20-64, 2017 or latest % 14 12 10 8 6 4
NOR
EST
SVN
NLD
ISL
HUN
BEL
SVK
IRL
CZE
FIN
GBR
LVA
USA
DNK
SWE
LUX
AUS
ISR
POL
DEU
CAN
CHE
ESP
PRT
NZL
0
AUT
2
16
Recommendations for sick leave compensation and disability benefits • Strengthen incentives to contain sick-leave absences. • Intensify management efforts to address sick leave. • In disability benefits, strengthen treatment and rehabilitation requirements and apply eligibility rules in general more strictly. • Make early intervention a stronger theme of reform. • Tighten medical assessment. 17
The population is ageing Share of 55-64 year-olds in the population aged 20-64 % 24
Norway
OECD
22 20 18 16 14 12 10
1990
1995
2000
2005
2010
2015
2020
2025
2030 18
Recommendations for early retirement and pensions • Align special pension provisions for certain occupational groups such as nurses, national defence and the police with the mainstream pension system. • Index age-dimensions of the pension system to life expectancy, such as the retirement-age range of 62 to 75 years. • Diminish the financial attractiveness of early retirement via disability benefits by putting the compensation for life-expectancy adjustment in pensions on hold. 19
Investment in skills and education is needed Scores in the OECD’s PISA tests of the knowledge and skills among 15-year-olds
20
A high share of youth do not complete upper secondary education Percentage of 25-34 year-olds without upper secondary education, 2017 or latest 55
Men
50
Women
45 40 35 30 25 20 15 10
KOR
CZE
POL
SVN
CAN
SVK
CHE
USA
ISR
LTU
IRL
FIN
AUT
AUS
GBR
DEU
HUN
LUX
FRA
NLD
NZL
EST
EU22
GRC
OECD
CHL
BEL
SWE
LVA
DNK
NOR
ISL
ITA
PRT
ESP
TUR
0
MEX
5
21
Recommendations to improve education and skills • Press ahead with primary- and secondary-school curriculum reforms. • Reduce apprentice remuneration to make it more attractive for employers to offer additional places. • Link part of the employer subsidy to course completion by apprentices. • Strengthen higher-education students’ incentives for timely course completion. • Ensure that higher education institutions provide comprehensive study guidance and support services. 22
IMPROVING BUSINESS CONDITIONS
23
Expenditure on R&D has risen Gross expenditure on R&D, percentage of GDP 3.0 2.5 2.0 1.5 1.0 NOR
USA
EU15
OECD
0.5 0.0
2010
2011
2012
2013
2014
2015
2016
2017 24
Businesses face high labour costs Hourly labour costs, 2018, EUR 60 Employers' social contributions and other labour costs paid by employer
50
Wages and salaries (total)
40 30 20 10 0
POL
ESP
GBR
ITA
EA19
FIN
DEU
FRA
SWE
DNK
NOR 25
There is room to improve regulation OECD Product Market Regulation (PMR) indicator Scale 0-6 from least to most restrictive 3.0
Norway
Average of top 5 best performing OECD countries
OECD
2.5 2.0 1.5 1.0 0.5 0.0
Overall Indicator
Public Ownership
Involvement in Business Operations
Simplification and Admin. Burden on Barriers in Service Barriers to Trade Evaluation of Start-ups & Network sectors and Investment Regulations 26
Recommendations for maintaining a successful business sector • Strengthen business dynamics through better routes to recovery for businesses in difficulty, including lighter penalties for failed entrepreneurs. • Continue to tackle weak points in business efficiency, including by paring back the extensive support for the agricultural sector. 27
TACKLING CLIMATE CHANGE
28
Norway is facing a sizeable emission-reduction challenge Greenhouse gas emissions MtCO2-equivalent 60 50 40 30 20
Historical emissions, excl forestry Projections under current implemented policies (decline 0.4 MtCO2 per year) Trajectory to 2030 unconditional target: minus 40% (decline 1.6 MtCO2 per year) Trajectory to 2030 conditional target: carbon neutrality (decline 2.3 MtCO2 per year)
10 0 2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
Paris agreement : 2030 unconditional target is for 40% reduction below 1990 level by 2030
2022
2024
2026
2028
2030 29
Recommendations to combat climate change • Pursue cost efficiency across sectors and borders in fulfilling Norway's Paris 2030-goal within the EU climate framework. • Intensify green-house-gas reduction measures in particular in transport and agriculture. Review and reform road pricing and vehicle taxation, giving weight to social, fiscal and environmental considerations.
30
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OECD Economics OECD
http://www.oecd.org/economy/norway-economicsnapshot/ 31