NORDIC WEALTH OVERFLOWS!
Monita Pesumal writes about a Scandinavian country that is among the richest on the planet
Europe’s northernmost nation is the Kingdom of Norway. It has an economic freedom score of 73.4, making it the world’s 28th freest economy. The country also enjoys one of the highest standards of living on Earth and is among the foremost developed democracies.
The discovery of offshore oil and gas in the 1960s made Norway wealthy, and it is now the world’s 25th largest economy with one of the highest per capita GDPs globally.
Agriculture accounts for nearly two percent of GDP while industry represents around 29 percent. Shipbuilding, metals, wood pulp and paper, chemicals, machinery and electrical equipment comprise Norway’s main manufacturing industries.
It also has one of the largest and most modern fishing fleets in the world. Fishing is a key activity and Norway is the second largest exporter of seafood after China. It even defies a global ban on commercial whaling along with Japan and Iceland.
Lastly but most importantly, Norway’s services sector employs more than 75 percent of the population and accounts for over 50 percent of the country’s annual GDP.
The economy is only partly dependent on natural resources and energy sources such as oil, gas, hydraulic energy, forests and minerals. Though this Scandinavian country is not a member of OPEC or the Declaration of Cooperation of 23 oil producing countries, it is the world’s seventh largest oil exporter.
However, to help stabilise global oil prices during the peak of the pandemic last year, Norwegian oil production was cut by 134,000 barrels a day in the second half of the year.
In addition, the energy ministry took an independent decision to delay commencing production in several fields until this year.
Europe’s current energy crisis and a spike in natural gas prices have seen Norwegian exports peak for three months since September with natural gas sales jumping sevenfold since last year. The boon is due to a surge in energy demand as borders begin to reopen and pandemic restrictions ease.
Energy company Equinor is two-thirds state owned, employs over 21,000 people, and is engaged in the development of oil, gas, wind and solar energy. Of the oil giant’s total production, about 35 percent is gas sold within Europe.
As reported by Bloomberg, its net income was projected to be US$ 2.3 billion – over six times higher than the previous year. In fact, much of the government’s budget is structured around revenue from Equinor.
The value of Norway’s sovereign wealth fund remained relatively stable as a strong euro and dollar offset a decline in global energy prices. Inflation remained below its two percent target in 2020 but was projected to climb to 2.2 percent this year amid an expected recovery in domestic consumption. Public debt is estimated to remain stable at around 41 percent of GDP in 2021 and 2022.
For many years, high taxes and heavy government spending remained the major obstacles to greater economic freedom in the kingdom. Having realised the importance of oil and gas revenue for welfare development, the Norwegians chose to deposit surplus wealth in their oil fund. This is why Norway has the world’s largest sovereign wealth fund, which was valued at nearly 1.3 trillion dollars at the end of 2020.
The country has a constitutional monarchy with a parliamentary democratic system of governance. The monarch is
the head of state, and executive power is exercised by a Council of State that’s presided over by the king and cabinet, which is headed by the prime minister.
Executive power is dependent on the direct or indirect support afforded by the legislature known as Storting, which is Norway’s parliament.
Norway’s new centre-left cabinet recently took office after Labour Party leader Jonas Gahr Støre presented a minority government following weeks of negotiations. The Social Democrats and Centre Party won 26.5 percent and 16.6 percent of the votes in the election respectively.
As such, Støre struck a coalition government agreement with Eurosceptic Centre Party leader Trygve Slagsvold Vedum. Støre took office after Erna Solberg was ousted in the September election following two terms as Norway’s PM.
Prime Minister Støre now has a team of 19, the majority of whom are women. Vedum is the finance minister and Emilie Enger Mehl is Norway’s youngest ever justice minister at 28. The foreign minister portfolio has been assigned to Anniken Huitfeldt. Together, they unveiled plans to make climate change, lower fuel prices and continued drilling in Arctic waters top priorities.
As is customary, the new government was formally approved by the king and took over leadership of the government that same day. It was a day after a deadly bow and arrow attack had taken place in Kongsberg, a small town outside Oslo. Five people died and many were injured. A Danish man was taken into custody over the attack.
Norwegian media quoted the outgoing prime minister as saying that “the most important thing to say today is good luck: Norway needs a government that is able to build our society in the future.”