Norway 1987-1988.

96 Pages·1988·5.282 MB·English

by  OECD

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NORWAY
ORGANISATION FORECONOMIC CO-OPERATION ANDDEVELOPMENT
Pursuanttoarticle1 oftheConventionsignedinParison 14lh December,
1960,andwhichcameintoforceon30thSeptember, 1961,theOrganisation
for Economic Co-operation and Development (OECD) shall promote
policiesdesigned:
- toachievethe highestsustainableeconomicgrowthandemployment
andarisingstandardoflivinginMembercountries,whilemaintaining
financial stability, and thus tocontribute to the development ofthe
worldeconomy;
- to contribute to sound economic expansion in Member as well as
non-membercountries in theprocess ofeconomicdevelopment; and
- to contribute to the expansion of world trade on a multilateral,
non-discriminatory basis in accordance with international obliga¬
tions.
The original Member countries of the OECD arc Austria, Belgium,
Canada, Denmark, France, the Federal Republic of Germany, Greece,
Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal,
Spain,Sweden,Switzerland,Turkey,theUnited Kingdomand the United
States. The following countries became Members subsequently through
accessionatthedatesindicatedhereafter:Japan(28thApril, 1964),Finland
(28thJanuary, 1969), Australia (7thJune, 1971) and New Zealand
(29th May, 1973).
TheSocialist Federal Republic ofYugoslavia takes part in someofthe
workoftheOECD (agreement of28thOctober, 1961).
Publicégalementen français.
©OECD, 1988
Application forpermission toreproduceortranslate
allorpartofthispublicationshould be madeto:
HeadofPublicationsService,OECD
2, rue André-Pascal, 75775 PARIS CEDEX 16, France.
Table of contents
Introduction 7
I. The economy after the oil price fall 9
Overview 9
Demand and output 11
The labour market 13
Prices, wages and incomes 15
Balance of payments 17
II. The policy framework 20
Fiscal policy 20
Monetary policy 22
Incomes policy 26
Supply-side policies 27
III. Short-term outlook and medium-term policy issues 29
Short-term prospects 29
Risks and uncertainties 32
Medium-term adjustment 33
IV. The public sector and structural change 38
The size and scope of the public sector 39
The government and the supply side 53
V. Conclusions 69
Notes and References 72
Annex: Calendar of Main Economic Events 73
Statistical annex 79
Tables
Text
1. Expectations and outcome 9
2. Supply and use of resources 12
3. Prices, wages and incomes 16
4. Government budget balances 21
5. Short-term prospects 31
6. Current external account projections 32
7. Contributions to changes in export market shares 36
8. General government expenditure, revenue and net lending 43
9. General government expenditure 44
10. The structure of general government expenditure 46
11. Government financial transactions 51
12. Gross and net debt of general government 52
13. Capital and labour use of general government 54
14. Tax/benefit situation of manufacturing production workers 57
15. Estimate of total marginal tax rates on capital in 1983 62
16. Public expenditure related to the implementation
of agricultural policy 63
17. Employment trends in three ailing sectors 66
18. Industrial support 67
19. Industrial support to shipbuilding and state companies 67
Statistical annex
A. Supply and use of resources, current prices 79
B. Supply and use of resources 80
C. Gross domestic product by industry oforigin, current prices 81
D. Gross domestic product by industry of origin 82
E. General government income and expenditure 83
F. Production by sector 84
G. Labour market and employment 85
H. Balance of payments 86
I. Foreign trade, total and by area 88
J. Prices and wages 89
K. Money and credit 90
Diagrams
Text
1. Financial balances 10
2. Labour market developments 14
3. Competitiveness and trade performance 18
4. Interest and exchange rates 23
5. Persisting imbalances 34
6. General government expenditure, revenue and net lending 42
7. Government gross lending 43
8. Outlays of government enterprises 44
9. Tax structure 48
10. Tax structure relative to OECD average 49
11. Marginal tax rates on wages and salaries 58
12. Marginal tax rates on wages and salaries with and without
standard deductions in 1984 60
13. Marginal tax rates on wages and salaries in the 1980s 61
14. Income support to farmers 64
BASIC STATISTICS OF NORWAY
THELAND
Area(I000sq.km) 1983 324 Majorcities(1.1.87):
Agriculturalarea(I000sq.km) 1983 9 Oslo 449220
Productiveforests(1000sq.km) 1983 63 Bergen 208915
THEPEOPLE
Population(31.12.86) 4175171 Civilianemployment, 1986 2086000
No.ofinhabitantspersq.km 13 ofwhich:Industry(%) 26.7
Netnaturalincrease(average 1981-1986) 8264 Agriculture,forestryandfishing(%) 7.2
Per I000inhabitants(average 1981-1986) 2.0 Otheractivities(%) 65.9
PRODUCTION
Grossdomesticproductin 1986(millionsofKr.) 516022 Grossfixedcapitalformation(1986):
GDPperhead(USJ) 16725 PercentageofGDP 27.5
Perhead,USJ 4607
THEGOVERNMENT
Publicconsumptionin 1986(percentageofGDP) 19.8 CompositionofParliament(No.ofseats):
Generalgovernmentcurrentandcapitalexpenditure Labourparty 71
in 1986(percentageofGDP) 48.2 Conservativeparty 50
Generalgovernmentcurrentrevenuein 1986 Christiandemocraticparty 16
(percentageofGDP) 56.9 Centre(Agrarian)party 12
Progressparty 2
Thesocialistleftparty 6
Total 157
Lastgeneralelection: 1985 Nextgeneralelection:September 1989
FOREIGNTRADE
ExportsofgoodsandservicesasapercentageofGDP Importsofgoodsandservicesasapercentageof
(average1982-1986) 44.4 GDP(average 1982-1986) 39.2
ofwhich: Mainimportsin 1986(percentageoftotal
Grossfreightandoildrillingearnings(1982-1986) 7.6 commodityimports):
Mainexportsin 1986(percentageoftotal Ships 0.9
commodityexports): Machinery,apparatusandtransportequipment
Forestryproducts 4.9 (excl.ships) 35.9
Basemetalsandproductsthereof 13.0 Rawmaterials(non-cdible)incl.fuelsand
Fishandfishproducts 6.1 chemicals 13.3
Machinery,apparatusandtransport Basemetalsandproductsthereof 9.3
equipment(excl.ships) 8.8
THECURRENCY
Monetaryunit:Krone CurrencyunitsperUSS,averageofdailyfigures:
Year1986 7.39
November 1987 6.42
Note: Aninternationalcomparisonofcertainbasicstatisticsisgiveninanannextable.
This Survey is based on the Secretariat's study
prepared for the annual review of Norway by the
Economic and Development Review Committee on
17th December 1987.
After revisions in the light ofdiscussions during the
review, final approval ofthe Survey for publication was
given bythe Committeeon 7thJanuary1988.
TheprevioussurveyofNorway wasissuedinJanuary
1987.
Introduction
Since early 1986 Norway has been in a difficult phase oftransition to a lower
pathofrealnationalincome.Theadjustmentprocess,enforcedontheeconomybythe
declinein oil prices, has beenslowasevidenced bythepersistenceofa largeexternal
imbalance. Asstated inlastyear'sSurvey,theoilpricecollapsecaught theeconomy
bysurpriseinaperiodofoverheatinganddeterioratinginternationalcompetitiveness.
Hence, a massive widening in the non-oil trade deficit was already under way when
the oil price fall pushed the current external account into huge deficit.
Thereorientation ofeconomicpoliciessince mid-1986 has been instrumental in
arrestingthegrowthofeconomicimbalances(Part I). Weakerdomesticdemandhas
reducedimportsandpressuresingoodsmarkets. Labourmarketconditions,however,
haveremained extremely tight duemainly totheshortening ofworking hours atthe
beginning of the year. Wage increases have continued at high rates despite a zero
settlement in central negotiations. Inflation has come down from double digit rates
recorded in early 1987 but continues to outpace that of main trading partners,
therebyerodingthegain in competitivenesswhich had resultedfromthedevaluation
in May 1986.
Demand-management policies were progressively tightened in the course of
1986and have remained restrictivesince (Part II). Fiscal restraint has beenlimited,
however, because ofthecontinued buoyancy oflocal authorities' spending. General
government expenditure growth, though slowing, has significantly exceeded expec¬
tations and, according to 1988 budget plans, will continue to grow faster than
national income. Efforts to tighten monetary policy have had some success even
thoughtheexpansionofcredithascontinuedata rapidpace. Amoreflexibleinterest
ratepolicyhasbeenpursuedoverthepasttwoyearsorsowithinterestratesbecoming
an instrument rather than a target of monetary policy.
On the basis of announced policies, domestic demand can be expected to
stagnateduringthe nexttwoyears (Part III). Theassociatedfall in real net imports,
while permitting some rise in real GDP, leaves, however, the current account in
sizeable deficit. Inflation, though abating, is projected to remain higher than in
tradingpartnercountries.Nonetheless,themedium-termoutlookhasimprovedsince
last year due to the reorientation ofeconomic policy, some rebound ofthe oil price
afterits 1986slumpandupwardrevisionsofenergyinvestmentandproductionplans.
While these developments may reduce the external constraint, they risk comprom¬
isingeffortstostrengthen thenon-oil economy. Part IVoftheSurvey, which reviews
long-term public sector trends, addresses the issue of how to increase efficiency in
both exposed and sheltered sectors via expenditure shifting and changes in
taxation.
I. The economy after the oil price fall
Overview
Last year's Survey focused on the "high pressure" economy of the mid-1980s
andtheneed forreorientationofeconomicpolicyaftertheoil pricefall inearly 1986
which reduced Norway's real disposable income by about one-tenth. By and large,
developments since then have been in line with what was expected in last year's
Survey. Reviseddatafor 1986show,however,thatdemandpressuresinthedomestic
economy were even stronger than initially estimated (Table 1). Excluding items
Table 1. Expectationsaodoutcome
Percentagechange,volume
1986 1987
OECD OECD OECD
NB87 Outcome NB87 NB88
86/87 86/87 87/88
Domesticdemand 7.8 7¥s 9.0 -0.7 -l'A -0.8 -l'A
Privateconsumption 4.7 4% 6.1 0.4 -'A -2.0 -2'A
Publicconsumption 2.0 2'A 3.1 1.7 l'A 2.2 2'A
Fixedinvestment 22.3 25'A 27.0 -4.6 -6% 0.1 -2'A
Stockbuilding1 -0.4 -* -0.9 0.5 'A -0.3 0
Exports 3.5 3% 0.6 1.8 4Vi 3.2 3'A
Imports 11.7 10¥< 9.6 -3.7 -4 -2.8 -3
Foreignbalance1 -3.0 -2'A -3.6 2.4 4'A 2.3 3
GDP 4.2 4'A 4.4 2.2 3 1.5 1%
MainlandGDP 3.8 3% 3.5 1.2 1 0.9 1
Employment 3.02 3 3.6 O.O2 1 0.42 2
Unemploymentrate(level) 2 2.0 2'A 2'A
Consumerprices 7.0 VU 7.2 7.4 8 8.4 8'A
Currentexternal balance
(percentofGDP) -6.4 -6'/4 -6.4 -8.1 -7 -5.6 -5'A
1. ChangeasapercentageofGDPinpreviousperiod.
2. Man-years.
Sources: NationalBudgets 1987and 1988(NB87andNB88);OECDEconomicSurveys,Norway1986/1987and 1987/1988
(OECD86/87andOECD87/88).