OSLO, Sep 11 – Norway, which votes in a general election on Monday, has emerged from the global economic crisis in better shape than most western nations due to its prudent management of oil riches.
With its massive budget surpluses, the Scandinavian country has been able to limit the recession and curb rising unemployment.
"In Norway, the crisis can\’t even be compared to the downturn experienced in the dot-com crisis of 2001-2002, while for many countries this is the worst crisis since World War II," said Torbjoern Eika, a researcher at Statistics Norway.
After a brief recession of six months, it returned to growth in the second quarter and should finish off the year with an annual contraction of just 1.2 percent, according to Statistics Norway.
That is far better than the Group of Seven (G7) most industrialised nations for whom the OECD has forecast a 3.7 percent contraction.
Norway can also boast the lowest jobless rate in the western world, at just 3.0 percent of the workforce.
"Crisis? Not here," triumphed Norwegian business daily Dagens Naeringsliv last week.
One of the world\’s biggest oil and gas exporters, Norway owes much of its economic health to its robust oil sector.
"The oil price has fallen but what has saved us is the level of oil investments, which have remained high despite the economic downturn," Norwegian School of Management professor Hilde Bjoernland told AFP.
The investments, which sustain large sectors of Norwegian industry, are expected to rise by another 5.5 percent this year.
The revenues from "black gold" have also enabled the Norwegian state to build up a massive nest egg that comes in handy in hard times.
Since 1996, successive governments have placed almost all of the country\’s oil revenues in a state pension fund designed to finance the needs of the generous social welfare state the day the wells run dry.
At the end of June, the fund was valued at 277 billion euros (395 billion dollars), making it one of the biggest sovereign wealth funds in the world.
Invested in international stocks and bonds, it registered significant losses in 2008 as the world\’s stock markets tumbled, but has since made a killing by amassing shares at bargain prices.
The result? While Norway\’s 4.8 million citizens represent less than 0.1 percent of the global population, they own one percent of the world\’s stock market capitalisation.
In normal times, the government is only allowed to use a maximum of four percent of the fund\’s value to balance its budget but in times of crisis it can use more.
That has allowed the left-wing coalition headed by Labour Prime Minister Jens Stoltenberg to draw copious amounts from the fund this year to finance economic stimulus measures.
Combined with the central bank\’s rapid reduction of interest rates, which have been slashed from 5.75 to 1.25 percent in the space of a few months, public spending has helped pull the country of its slump.
"Oil alone is not enough to explain the strength of the Norwegian economy. You also have to have a reasonable political management," chief economist Oeystein Doerum at leading bank DnB NOR said.
"When times are good we put money aside, and when times are less good we siphon" from the fund, he said.
In the election campaign ahead of what is expected to be a close race on Monday, the main right-wing opposition party, the populist Progress Party, has pledged to use more of the fund\’s money to finance tax cuts, against the advice of numerous economists.