Norwegians ‘in an optimistic bubble’

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Just as Norway once again was ranked as the best country in the world in which to live comes word that Norwegians themselves must firmly believe it. A new survey indicates a level of optimism so high that some economists worry they’re living in a bubble that may pop.

Only 1 percent of Norwegians questioned in a new consumer survey think the global economy, currently in crisis mode, will have any direct consequences on their own wallets. The survey was conducted by research firm Synovate for Norway’s largest bank, DnB NOR.

While the European debt crisis rages just outside Norway’s borders, fully 64 percent of Norwegians questioned don’t expect any changes in their own personal finances or economy during the next year. While unemployment remains high elsewhere and consumer demand declines, 28 percent of Norwegians think their own economic circumstances will improve. Only 6 percent think they may face tougher times ahead.

‘Surprised’
Even though Norway once again topped the United Nations Development Program (UNDP) Human Development Index for 2011 that was released this week (external link), DnB NOR’s consumer economist Silje Sandmæl was surprised.

“Optimism is good,” Sandmæl told newspaper Dagsavisen on Friday. “But it’s quite naive to think that the (economic) bad weather will simply pass over Norway while it blows up to a real storm in Europe.”

Economist Ådne Cappelen at state statistics bureau SSB (Statistics Norway) agreed. Everything that happens in the European Union (EU) is important for Norway and has an effect on the Norway’s fortunes, he said, even though Norway’s not a member of the EU.

More flexibility, but caution advised
“On the one side we have little or, in practical terms, no influence on what goes on in the EU, and we stand outside the discussion,” Cappelen told Dagsavisen. “On the other hand, that’s an advantage … since we’re not in the euro cooperation. That gives us more flexibility in forming our own economic policies than countries in the EU have.”

And, of course, Norway has its oil and gas industry that has pumped up its fortunes for the past four decades. But the drama going on around the euro and Greek debt definitely has consequences for Norway, Cappelen warns, even though DnB NOR’s survey suggests that Norwegian consumers don’t seem to fear them. The question is how hard the consequences will hit the Norwegian economy. Government officials have been warning for the past year that exports can slow and interest rates can rise, for example, and that’s already occurring.

Sandmæl offered the following advice to Norwegians: Don’t take on unnecessary debt, calculate how much of an interest rate hike can be tolerated, consider converting adjustable-rate home mortgages to fixed-rate, take advantage of currently low rates to pay down principal, calculate how loan payments can be met if household income cuts in half, and set aside money in savings before spending it on unnecessary temptations, with the goal of building up a buffer of two- to three months worth of monthly income. Whether Norwegians will follow such advice, especially on the eve of the holiday shopping season, remains to be seen.

Views and News from Norway/Nina Berglund

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