http://www.oecd.org/norway/economic-survey-norway.htm

2016 OECD Economic Survey of Norway

Rebalancing the economy

Oslo, 18 January 2016

@OECD@OECDeconomy

• Continue prudent macroeconomic policies, including managing petroleum wealth equitably and sustainably

• Use structural policies to boost living standards -- this Survey includes in-depth examination of higher education (Chapter 1) and rural economies (Chapter 2)

Key messages of the Survey

GDP per capita is high

Source: OECD (2015), "Aggregate National Accounts, SNA 2008 (or SNA 1993): Gross domestic product", OECD National Accounts Statistics (database); OECD (2015), Analytical Database.

Even accounting for cost-of-living differences, Norway’s GDP per capita is now about 67% greater than that of the Euro Area

Well-being is impressive

Source: Calculations based on OECD (2015), "Better Life Index 2015", OECD Social and Welfare Statistics (database); OECD (2015), "Income distribution", OECD Social and Welfare Statistics (database).

Norway’s oil fund has become very large - helping finance the budget

Source: Norwegian Ministry of Finance.All petroleum-sector revenues are channelled into the fund—this helps protect the economy from some of the problems created by uncertain and fluctuating oil prices

BUT THERE ARE CHALLENGES

The recent oil-price fall illustrates the vulnerabilities of petroleum dependence

Source: OECD, Analytical Database.

Between Q2 2014 and Q4 2o15 the oil price fell by 59%, prompting exchange-rate depreciation

Cost competitiveness has been falling

Source: OECD, Analytical Database.

Unit labour costs in Norway are about 60% higher than they were in 2000. In the Euro Area they are less than 30% higher

Public spending is high

Source: OECD, National Accounts at a Glance.

House prices are booming

Source: OECD, Analytical House Price database; Norges Bank (2015), "Monetary Policy Report with financial stability assessment 4/15".

PAVING THE WAY FOR ECONOMIC TRANSITION

Containing fiscal expansion

Source: Norwegian Ministry of Finance.

1. Rising oil-fund wealth has meant allowable fiscal deficits under Norway’s fiscal rule have grown rapidly

2. Budgets have been pitched well below the allowable level

Source: OECD (2015), "Revenue Statistics: Comparative tables", OECD Tax Statistics (database); Norwegian Ministry of Finance.

The overall tax burden is high

Norway’s high tax burden makes it harder the economy to rebalance in the wake of oil-price shocks

Business regulation is in reasonable shape

Norway scores well in the OECD’s product-market regulation index, though it is losing its lead as other countries catch up

Source: OECD (2015), "Economy-wide regulation", OECD Product Market Regulation Statistics (database).

• Past Surveys have identified several areas where there is room for efficiency improvements: – Primary and secondary education (2008

Survey)– Health care (2010 Survey)– Sickness and Disability Benefit (2010 Survey)

• This Survey identifies issues in higher education (Chapter 1) and in agricultural support (Chapter 2)

Improving public-spending efficiency

GREATER EFFICIENCY AND QUALITY IN HIGHER

EDUCATION WOULD HELP REBALANCING

In primary and secondary education high spending has led to only average performance…

Source: OECD (2014), PISA 2012 Database; OECD (2015), "Education at a Glance 2015", Table B1.1a.

…and the same applies to higher education

Source: OECD (2015), "Education at a Glance 2015", Table B1.2; Author's calculations based on Times Higher Education (THE), "World University Rankings 2015-2016“.

According to this measure, Norway’s best university ranks lower than those in other Nordic countries

Many small providers

Source: Norwegian Social Science Data Services (2015), Database for Statistics on Higher Education.

Many small institutions are providing tertiary education in remote areas…

… they often face challenges in cost-efficiency and quality

• Mergers underway will reduce the number of institutions from 53 to 42, further mergers should be promoted

Relatively low degree completion and long study times are also problematic

Source: OECD (2013), "Education at a Glance 2013", Table A4.1; Statistics Norway.

• more targeted incentives for students to complete their courses on time

• steering student choices for instance, via loan discounts for subjects with high demand

• making institutions’ funding more contingent on getting students to complete degrees

Student choices and provider incentives could be improved by:

SHIFTING RURAL SUPPORT

Agricultural subsidy is high

Source: OECD (2015), "Agricultural Support Estimates (Edition 2015)", OECD Agriculture Statistics (database).

Norwegian agricultural support comprises around 100 schemes providing financial support plus numerous import tariffs

• Reduce agricultural import tariffs and subsidies • Encourage economic diversification by broadening

support for rural areas

Many small municipalities

Source: Statistics Norway; Statistics Finland; Statistics Sweden; Statistics Denmark.

• Improve the efficiency of Norway’s many small rural municipalities, including through mergers

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