While countries on both sides of the Atlantic are suffering from huge national debt and sluggish economies, there’s still reason to wave the flag in Norway. High prices for its natural resources and billions in financial reserves have put the country in a historically unique situation, say local economists, and will help fend off effects of the debt crises elsewhere.
“Norway is in the world’s luckiest position,” Øystein Thøgersen, professor at the Norwegian School of Economics and Business Administration (Norges Handelshøyskole, NHH) in Bergen, told newspaper Dagens Næringsliv (DN) on Thursday. “We had great fortune because our products have had an incredible price development. Given the way the world is screwed together these days, Norway is in a totally unique position compared to other countries.”
As usual, it’s first and foremost Norway’s offshore oil industry that continues to fuel economic growth, with still-high oil prices pumping huge revenues into the state treasury at a time when other countries are drowning in debt. But economists claim it’s also Norway’s social welfare state and management of its oil resources that have made the country so strong when other national economies, including the United States, are proving to be weak.
“It’s fascinating how the Norwegian system has been disciplined even in a situation where we could have been free-spending,” Thøgersen said. Despite a long string of governments from both the right and left sides of Norwegian politics over the past few decades, he noted that they’ve all embraced financial policies in line with the so-called handlingsregelen, the rule that limits use of oil revenues to 4 percent of the total assets in the oil fund, where most of the revenues are stashed away for future generations.
He and several economists believe that history will show how policies over the past 20 years have been good. Politicians seem to have understood the need for balance between free, competitive markets and welfare, notes Kalle Moene, a professor at the University of Oslo. “We have understood that our welfare depends on us being competitive as well,” Moene told DN.
Others point to Norway’s lack of debt, its savings, strong tax revenues and distance from developments within the European Union, since Norway is not a member of the EU and has its own financial and monetary policies.
Kjersti Haugland, senior economist at DnB NOR Markets, the securities arm of Norway’s biggest bank, said that all of Norway’s economic indicators are good, with low unemployment, salary growth, rising oil revenues and increased spending among Norwegians. She doesn’t think the debt crises in Europe or the US will have a huge effect on Norway’s economy because it’s fundamentally strong.
“We are in a unique situation and will manage well through any crisis,” she said.
Biggest bank profitable but vulnerable
DnB NOR delivered more strong earnings this week, better than analysts had expected, but its shares were hit by the debt worries that have been hitting stock markets hard all over the world. DnB Chief Executive Rune Bjerke traveled to London to reassure investors who fear Europe’s debt crisis will hit DnB too.
Bjerke makes no efforts to minimize the possible effects of debt crises in Europe and the US, though, and told DN they will “make it tougher to address challenges.” He thinks the EU will react in a way that will avoid the situation leading to a global crisis. Nonetheless, he says, “European countries will suffer, and banks will suffer.” DnB’s insurance firm Vital, for example, has NOK 2.7 billion invested in Italian securities, but its boss thinks the amount is “manageable” and Vital also has delivered good results.
Bjerke also thinks Norway’s strong economy will help DnB as will demand for its raw materials not least in countries like India and China. He, like all his colleagues, is following the financial news closely from Europe and the US “because it means so much” to Norway and DnB Nor.
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