Norwegians have the second-highest GDP per capita in Europe (after Luxembourg) and the world’s sixth-highest GDP (PPP) per capita. Norway is now the world’s second-wealthiest country in terms of monetary value, having the biggest capital reserve per capita of any country. Norway is a net foreign creditor of debt, according to the CIA World Factbook. Norway ranked first in the world in the UNDP Human Development Index (HDI) for six years in a row (2001–2006), and again regained the top spot in 2009–2015. Norway has one of the best living standards in the world. Norway is ranked bottom on Foreign Policy Magazine’s 2009 Failed States Index, despite being the world’s most well-functioning and stable country. Norway is ranked fourth in the 2013 adjusted Better Life Index and third in intergenerational earnings elasticity, according to the OECD.
The Norwegian economy is an example of a mixed economy, a successful capitalist welfare state and social democracy with a mix of free market activity and significant governmental ownership in important industries. In Norway, public health care is free (after an annual fee of approximately $230 for those over the age of 16), and parents enjoy 46 weeks of paid parental leave. Petroleum production contributes significantly to the state’s revenue from natural resources. Norway presently has a relatively low unemployment rate of 2.6 percent. 69 percent of those aged 15 to 74 are employed. People in the labor force are either employed or seeking employment. Disability pensions are received by 9.5 percent of the population aged 18–66, while the government employs 30 percent of the labor force, the most in the OECD. Norway has some of the greatest hourly production levels and average hourly earnings in the world.
Because of the egalitarian ideals of Norwegian culture, the pay disparity between the lowest paid worker and the CEO of most businesses is considerably less than in similar Western countries. This is also shown by Norway’s low Gini coefficient.
The state owns a significant portion of important economic sectors, including the strategic petroleum industry (Statoil), hydroelectric energy production (Statkraft), aluminum production (Norsk Hydro), the biggest Norwegian bank (DNB), and telecommunications provider (Telenor). The government controls about 30% of the stock prices on the Oslo Stock Exchange via these large corporations. When non-listed businesses are added, the state has an even greater ownership stake (mainly from direct oil licence ownership). Norway is a significant maritime country and boasts the world’s sixth biggest commercial fleet, with 1,412 merchant boats owned by Norwegians.
Norwegians rejected attempts to join the European Union in referendums in 1972 and 1994. (EU). Norway, along with Iceland and Liechtenstein, does, nevertheless, participate in the European Union’s single market via the European Economic Area (EEA) agreement. The EEA Treaty between the European Union and the EFTA nations, which has been translated into Norwegian legislation via “ES-loven,” outlines the processes for adopting European Union regulations in Norway and the other EFTA countries. Norway is a strongly integrated member of the EU internal market in the majority of industries. Agriculture, oil, and fish are only a few of the industries not fully covered by the EEA Treaty. Norway has also ratified the Schengen Agreement and a number of other intergovernmental agreements between EU member states.
The nation is blessed with abundant natural resources like as petroleum, hydropower, fish, forests, and minerals. Large quantities of petroleum and natural gas were found in the 1960s, resulting in an economic boom. Norway has one of the best living standards in the world, thanks in part to a huge quantity of natural resources relative to population size. The petroleum sector contributed 28 percent of state income in 2011.
Norway was the first nation to prohibit tree cutting (deforestation) in order to avoid the extinction of rain forests. In 2014, the nation, together with the United Kingdom and Germany, announced its intention at the United Nations Climate Summit. Timber, soy, palm oil, and cattle are often associated with forest degradation. Norway must now find alternative ways to supply these vital goods without negatively impacting the environment.
Oil and gas export earnings have grown to almost 50% of total exports and account for more than 20% of GDP. Norway is the world’s fifth-largest oil exporter and third-largest gas exporter, although it is not an OPEC member. The Norwegian government created the sovereign wealth fund (“Government Pension Finance — Global”) in 1995, using oil earnings, including taxes, dividends, sales revenues, and license fees, to fund it. This was designed to minimize overheating in the economy caused by oil profits, to lessen uncertainty caused by oil price volatility, and to create a cushion to compensate for expenditures associated with population aging.
The government controls its petroleum resources via a mix of state ownership in major oil field operators (with about 62 percent ownership in Statoil in 2007) and the wholly state-owned Petoro, which has a market value almost twice that of Statoil, as well as SDFI. Finally, the government regulates the licensing of field exploration and production. Outside of Norway, the fund invests in established financial markets. The budgeting guideline (Handlingsregeln) states that no more than 4% of the money should be used each year (assumed to be the normal yield from the fund).
The Government Pension Fund’s assets were valued at about US$884 billion (equivalent to US$173,000 per capita) in August 2014, or nearly 174 percent of Norway’s current GDP. It is the world’s biggest sovereign wealth fund. The fund owns about 1.3 percent of all listed shares in Europe and more than one percent of all publicly traded shares worldwide. The Norwegian Central Bank has offices in London, New York, and Shanghai. Guidelines established in 2007 enable the fund to invest up to 60% of its capital in shares (up from a previous limit of 40%), with the remainder allocated to bonds and real estate. As the stock market plummeted in September 2008, the fund was able to purchase additional shares at bargain rates. As a result, by November 2009, the losses caused by the market volatility had been recovered.
Other countries with resource-based economies, such as Russia, are attempting to emulate Norway by creating comparable funds. The Norwegian fund’s investment decisions are guided by ethical standards; for example, the fund is not permitted to invest in businesses that manufacture components for nuclear weapons. The worldwide community applauds Norway’s extremely transparent investment system. The fund’s future size is inextricably tied to the price of oil and developments in international financial markets.
In an IPO in 2000, the government sold one-third of the state-owned oil firm Statoil. Telenor, the major telecom provider, was listed on the Oslo Stock Exchange the following year. The state also holds a sizable stake in Norway’s biggest bank, DnB NOR, as well as the airline SAS. Since 2000, the economy has grown rapidly, reducing unemployment to levels not seen since the early 1980s (unemployment in 2007: 1.3 percent ). The worldwide financial crisis mainly impacted the manufacturing sector, although unemployment remained low in August 2011, at at 3.3 percent (86,000 individuals). In comparison to Norway, Sweden had much higher actual and predicted unemployment rates as a consequence of the recession. Thousands of mostly young Swedes moved to Norway seeking employment during these years, which was simple since the Nordic countries’ labor markets and social security systems overlapped. Norway’s GDP exceeded Sweden’s for the first time in history in the first quarter of 2009, despite having half the population.
Norway has substantial mineral resources, and its mineral output in 2013 was estimated at US$1.5 billion (Norwegian Geological Survey data). Calcium carbonate (limestone), building stone, nepheline syenite, olivine, iron, titanium, and nickel are the most valuable minerals.
Norway is also the world’s second-largest seafood exporter (in value, after China). Hydroelectric facilities provide about 98–99 percent of Norway’s electric power, more than any other nation on the planet.
Between 1966 and 2013, Norwegian firms developed 5085 oil wells, the majority of which were in the North Sea. 3672 are utviklingsbrnner (normal production); 1413 are letebrnner (exploration); and 1405 have been discontinued (avsluttet).
Wisting Central—calculated size in 2013, 65–156 million barrels of oil and 10 to 40 billion cubic feet (0.28 to 1.13 billion cubic metres) of gas (utvinnbar). The Castberg Oil Field (Castberg-feltet) is estimated to have 540 million barrels of oil and 2 to 7 billion cubic feet (57 to 198 million cubic metres) of gas (utvinnbar). The Barents Sea is home to both oil fields.