Norse silver lining

Press, 12 February 1986, Page 40

Norse silver lining

Reprinted from the "Economist”

Oil and gas account for a fifth of Norway’s GDP and half of its export earnings. Oil taxes bring in 20 per cent of the Government’s revenue. The present fall in oil prices does not please the tax-gatherers. But the industrialists insist on sounding cheerful. Unless oil prices settle at a level that makes new investment in the North Sea look unprofitable — which means at below SUSIS a barrel — they say that the net effect of lower oil prices should be to help, not damage, the country’s economy. What is bad for oilmen could be the saving of some non-oil industries, notably shipping. If the oil price stays around SUS2O a barrel in 1986, the Government’s gas-and-oil revenue will be halved from 1985’s NKr47B (SUSS.SB) and the budget deficit would probably be NKr2OB-258. That would be around 4 per cent of GDP, and it is doubtful if Norway ought to allow that..

Any rise in the budget deficit would serve to ooost the big expansion in domestic demand experienced in 1985, an election year in which investment boomed, private consumption grew by an estimated 7 per cent in real terms and bank advances by 30 per cent.

The oil-financed boom that has lasted since the mid-19705, plus a steady appreciation of the krone, have together hurt manufacturing, which employs 365,000 people (against 377,000 in 1975, and 12,000 employed in oil-and-gas production). — Copyright.