The day before Oslo’s stock exchange took a dive along with others all over the world on Wednesday, the OECD (Organization of Economic Cooperation and Development) warned that Norway’s long-strong economy was vulnerable. The ongoing decline in oil prices while housing prices keep rising worries economists at the OECD most of all.
“Norway is doing very well and will continue to do so in the future,” Bob Ford, deputy director of the OECD, said when presenting its report on the Norwegian economy (external link) to Finance Minister Siv Jensen. “But the fall in oil prices (down 70 percent since 2014) shows how vulnerable the economy is.”
On Wednesday, stock in state oil company Statoil fell below NOK 100 for the first time in recent memory. Statoil CEO Eldar Sætre, a veteran of the company, said he couldn’t remember the last time Statoil shares were trading at such a low level, NOK 97.90 in the late afternoon.
The main index of the Oslo Stock Exchange fell by 4.71 percent, with Statoil shares down 7.2 percent. Much of the drop was tied to the price of a barrel of North Sea crude oil falling below USD 28, a level that “makes Norway poorer,” in the words of one local bank economist.
The OECD, which ranks Norway high in terms of quality of life (external link), remains worried about a real estate bubble bursting. “You can never see a bubble when you’re inside of it,” Ford noted, warning that real estate prices could fall “quite a lot” if it bursts. He urged tax reform measures that would remove some of the financial incentive for taking on heavy debt to buy homes, but Jensen quickly rejected the proposal. “This government has no intention of increasing real estate taxes,” she told news bureau NTB. “But we are following developments closely.”