Norway’s central bank (Norges Bank) once again gathered 300 of the country’s most powerful people Thursday night, to listen to its chief’s annual perspectives on the economy. Øystein Olsen warned that recent declines in stock markets around the world can weaken Norway’s enormous piggy bank known as the Oil Fund.
What goes up must come down, Olsen reminded his audience of political and business leaders. After months on end of rising markets, they suddenly took a dive last week, and that hurts the Oil Fund that’s heavily invested in stock markets abroad.
“We can see a downturn that’s much stronger than what we’ve seen now,” Olsen told Norwegian Broadcasting (NRK) before speaking to Norway’s elite. Not only can growth come to a halt, the value of the Oil Fund (now set at roughly a dizzying NOK 8,000 billion) could decline.
Olsen said the fund, which is run through the central bank, currently covers around 15 percent of the expenses of Norway’s social welfare state. Any decline would adversely affect amounts available to pad the state budget year after year.
Has made Norway a wealthy country
Norway’s Oil Fund, which has been fueled by the country’s offshore oil revenues for more than 20 years, ranks as the biggest sovereign wealth in the world. It’s thus made Norway one of the wealthiest countries in the world, and Finance Minister Siv Jensen the envy of her international colleagues. Jensen’s Progress Party has long advocated using more oil money in the state budget, and thus investing in Norwegian infrastructure, schools, elder care and other social welfare programs instead of strictly in stock markets abroad.
The Oil Fund is also, though, meant to finance pensions for future generations of Norwegians, and needs to be preserved. After doubling in value just over the past five years on bull markets, shares were falling all over the world last week, also in Oslo, and the trend can continue. Olsen reminded his audience, with Jensen in the front row, that it was just over six years ago that stock markets also tumbled, and that caution must be exercised when tapping into the Oil Fund’s resources.
The central bank boss also spent some time reflecting on technological changes, including robotics and the use of artificial intelligence. He noted that even though technological advancement is occurring faster than ever before, growth in productivity is not keeping pace.
Interest rates still likely to rise
Olsen also repeated his predictions that the central bank’s board will likely raise interest rates later this year. The head of Norway’s largest trade union federation LO, Han-Christian Gabrielsen, said later that he hopes any interest rate rise will occur gradually. He was glad, though that Olsen also sees room in the economy for wage growth this year.
Olsen’s annual address included few if any surprises, with investor and finance commentator Trygve Hegnar even calling it “boring.” The lack of surprises and more warnings, however, may indicate just how well Norway’s economy has recovered from the oil price collapse four years ago. Olsen himself called it “a good sign” that interest rates may rise for the first time in seven years: “Two years after the economy bottomed out, growth has taken hold and unemployment is nearing a normal level.”
newsinenglish.no/Nina Berglund
