Presentation of the OECD 2017 Economic Survey of Norway

OECD ECONOMIC SURVEY OF NORWAY Thriving in a changing world Oslo, Tuesday 19 December 2017

www.oecd.org/eco/surveys/economic-survey-norway.htm

OECD Economics OECD

GDP per capita, constant USD prices, 2010 PPP

Thousand 70 OECD

60

Norway

Thousand 70

Norway (Mainland)

60

50

50

40

40

30

30

20

20

10

10

0

1970 72

74

76

78

80

82

84

86

88

90

92

94

96

98 2000

Source: OECD National Accounts database, and OECD Analytical Database.

2

4

6

8

10

12

14

16

0

2

Milliers

Norway’s GDP per capita remains impressive

Inequality is low Inequality (Gini coefficient)ยน of market income and disposable (net) income 0,50

Inequality of market income

Inequality of disposable income

OECD Gini index, market income

OECD Gini index, disposable income

0,45 0,40 0,35 0,30 0,25 0,20

NOR

SWE

DNK

DEU

FIN

FRA

OECD

1. The Gini coefficient ranges from zero to 1, zero indicating all individuals have the same income; 1 indicating one individual receives all income.

Source: OECD Income Distribution Database (IDD).

3

Employment is a key driver of low inequality and high well-being Gender wage gap 2015 or latest available % of male median wage 25

20 15 10

5 0

DNK

NOR

FRA

SWE

DEU

FIN

EU28

4

Real GDP growth is picking up

Real GDP growth (mainland)

Y-o-Y % change 6

4 2 0 -2 -4

Real GDP (Mainland) 2008

2009

2010

2011

Source: OECD Analytical Database; Norges Bank.

2012

2013

2014

2015

2016

2017

5

Labour costs remain high Cost-competitiveness Euro-denominated unit labour cost index Index 2000 = 100 220

Index 2000 = 100 220 Denmark

200

Norway (Mainland)

Sweden

200

180

180

160

160

140

140

120

120

100

100

80

2000

2002

2004

2006

2008

2010

Source: OECD Analytical database, and OECD Economic Outlook database.

2012

2014

2016

80

6

Productivity has slowed Trend in real labour productivity growth Per hour worked

% change 3,0

Norway (mainland)

% change 3,0

OECD

2,5

2,5

2,0

2,0

1,5

1,5

1,0

1,0

0,5

0,5

0,0

2000

2002

2004

2006

2008

2010

Source: OECD Analytical database, and OECD Economic Outlook database.

2012

2014

2016

0,0

7

Maintaining macroeconomic and financial stability

8

Inflation remains well anchored

Long term CPI growth and expectations % 3,5 Expected inflation 2 years ahead

CPI 10-year m.a, annual change

3,0

2,5 2,0 1,5

1,0 0,5 0,0

2008

2009

2010

2011

Source: Norges Bank ; OECD analytical database.

2012

2013

2014

2015

2016

2017

9

Adjustment of the fiscal rule implies an end to fiscal expansion % of trend mainland GDP 9 Structural non-oil deficit 8

3 percent path

7 6

5 4 3 2

1 0 2000

2004

Source: Ministry of Finance.

2008

2012

2016

2020

2024

10

Recommendations for macroeconomic policy 1. Normalise the monetary stance as forecast, with rate increases starting in late 2018 2. Focus on restraint in government spending and public-service efficiency in light of the adjusted fiscal rule

11

Household debt remains high Household debt and house prices % of disposable income 260 240

Household debt (left)

Index 2000 = 100 260 240

Real house price (right)

220

220

200

200

180

180

160

160

140

140

120

120

100

2000

2002

2004

2006

2008

2010

Source: Statistics Norway; Norges Bank ; and OECD Analytical database.

2012

2014

2016

100

12

House prices have fallen in recent months, especially in Oslo

Index 2014 = 100 150

140

Index 2014 = 100 150

Oslo including BĂŚrum (quaterly, existing dwellings) Norway (monthly)

140

130

130

120

120

110

110

100

100

90

2014

2015

Source: Statistic Norway; and Real Estate Norway (Eiendom Norge).

2016

2017

90

13

Recommendation regarding the housing market • Be prepared to respond to a hard landing in the housing and debt markets. This should include, as necessary, delay to monetary policy normalization and the introduction of targeted fiscal policy

14

Improving business policies

15

Norwegian business operates in a high cost environment Hourly labour costs, 2016

EUR 60

EUR 60

50

50

40

40

30

30

20

20

10

10

0

POL

Source: Eurostat.

ESP

GBR

ITA

EA19

DEU

FIN

FRA

SWE

DNK

NOR

0

16

There is room to improve regulation

3,0

OECD Product Market Regulation (PMR) indicator, 2013 Scale 0-6 from least to most restrictive

2,5 2,0 1,5 1,0

0,0

NLD GBR AUT DNK NZL AUS DEU SVK ITA EST FIN PRT HUN BEL CZE JAP CAN ESP IRL LUX NOR FRA OECD ISL CHE CHL SWE USA LVA POL SVN GRC KOR MEX ISR TUR

0,5

Source: OECD Product Market Regulation Database.

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Recommendations for maintaining a successful business sector 1. Complete the programme of income-tax rate cuts and consider further reductions

2. Continue strengthening competition policy 3. Reduce state stakes in business further 4. Strengthen routes to recovery in the insolvency regime

5. Replace the taxi-licencing system

18

Strengthening skills, encouraging employment

19

Scores in mathematics and science remain middle-ranking Norway Top 3 OECD

OECD Bottom 3 OECD C. Sciences

A. Reading Average PISA score 550

550

550

530

530

530

510

510

510

490

490

490

470

470

470

450

450

450

430

430

430

410

2000 2003 2006 2009 2012 2015

B. Mathematics

410

Source: OECD PISA 2000-2015 Databases.

2000 2003 2006 2009 2012 2015

410

2000

2003

2006

2009

2012

2015

20

Recipiency of Disability Benefit remains an issue People on Disability Benefit, % of age category A. Age 18-34

B. Age 50-67

2,5

40 35

2,0

30 25

1,5

20

1,0

15 10

0,5

5 0,0 2008

2017

Source: Norwegian Labour and Welfare Administration (NAV).

0 2008

2017

21

Recommendations for maintaining a successful business sector 1. Raise employer awareness about the incentives to offer apprenticeship places

2. Strengthen employers’ incentives to offer apprenticeship places by reducing apprentice wages or increasing subsidies 3. Press on with reform to sick leave and disability benefit including through a longer employerfinanced phase of sick leave and tighter medical assessment

22

Improving investment in transport infrastructure

23

Norway invests heavily in transport infrastructure General Government investment in transport % of GDP 2,0 1,8 1,6 1,4 1,2 1,0 0,8 0,6 0,4 0,2 0,0 2000

Denmark

Norway (Mainland)

2005

Source: OECD National Accounts database.

Sweden

2010

% of GDP 2,0 1,8 1,6 1,4 1,2 1,0 0,8 0,6 0,4 0,2 0,0 2015

24

Major road projects initiated in the period 2014-17 Number of projects

Net benefit (NOK million)

Cost (NOK million)

Net Benefit to Cost ratio

1. Oslo-Svinesund-Kornsjø

1

−860

1830

−0.47

2. Oslo-Ørje/Magnor

2

−1790

4750

−0.38

3. Oslo-Grenland-Kristiansand-Stavanger

7

12080

33890

+0.36

4. Stavanger-Bergen-Ålesund-Trondheim

4

18020

26800

+0.67

5. Oslo-Bergen/Haugesund. Branch via Sogn to Florø

4

−2320

8950

−0.26

6. Oslo-Trondheim. Branches to Måløy, Ålesund, and Kristiansund

3

5210

6500

+0.80

7. Trondheim-Bodø. Branches to the Swedish border

2

−1740

5670

−0.31

8. Bodø-Narvik-Tromsø-Kirkenes. Branches to Lofoten and the national border

2

−530

1890

−0.28

Corridor

Source: Sager (2016).

25

Recommendations for maintaining a successful business sector 1. Strengthen the influence of cost-benefit analysis in project selection

2. Improve checks against cost inflation after projects are selected

26

More Information‌ Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

www.oecd.org/eco/surveys/economic-survey-norway.htm

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