OECD ECONOMIC SURVEY OF NORWAY 2019

Sustaining wellbeing and employmentAlvaro Pereira, OECD Director, Oslo, Monday 9 December 2019

OECD

OECD Economics

http://www.oecd.org/economy/norway-economic-snapshot/

Living standards remain high

2

GDP per capita, U.S. dollars, purchasing-power parity basis

0

10

20

30

40

50

60

70

80

GDP growth is robust

3

Real mainland GDP

00.5

11.5

22.5

3

2013 2014 2015 2016 2017 2018 2019

Y-o-Y % change

Growth will ease in the coming quarters

4

Mainland GDP growth will be around 1.7% by 2021

(Annual growth rates, unless specified) 2018 2019 2020 2021 Mainland GDP 2.2 2.5 2.0 1.7 Private consumption 1.9 1.8 1.9 1.9 Government consumption 1.4 2.2 1.9 1.8 Gross fixed capital formation 2.8 4.3 3.3 2.1 Exports of goods and services -0.2 1.6 2.6 3.1 Imports of goods and services 1.9 5.45 1. 2.0 Unemployment rate (% of labour force) 3.8 3.4 3.2 3.2 Consumer price index 2.7 2.3 2.0 2.2

House prices continue to rise

5

Nominal house price index, 2010 = 100, seasonally adjusted

80100120140160180200

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Oslo Norway

Commercial real estate prices are rising steeply

6

Estimated real selling prices per square meter for prime office space in Oslo, index 1998=100

Non-oil deficits can no longer increase rapidly

7

Non-oil deficits and projection of 3 percent of the value of the oil fund

0

2

4

6

8

10

12

2000 2010 2020 2030 2040

% of trend mainland GDP

Structural non-oil deficit 3 percent path

MAINTAINING HIGH EMPLOYMENT

8

Labour force participation has been falling

9

76

77

78

79

80

81

82

83

84

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Norway Average of top 5 OECD countries

Labour force participation rate, 15-64 years%

Sickness absence from work is high

10

Sickness absences of full-time dependent employees, average number of days per year, 2018

0

5

10

15

20

25

GRC

TUR

HUN

LTU

USA ITA

LVA ISL

IRL

CAN

EST

GBR

SVK

CHE

POL

DNK

LUX

OECD NL

DCZ

EAU

TES

PSW

ESV

NFR

ABE

LDE

UPR

TFI

NNO

R

Days

A substantial share of the population is on disability benefit

11

0

2

4

6

8

10

12

14AU

TNZ

LPR

TES

PCH

ECA

NDE

UPO

LIS

RAU

SLU

XSW

EDN

KUS

ALV

AGB

RFI

NCZ

EIR

LSV

KBE

LHU

N ISL

NLD

SVN

EST

NOR

%Disability benefits recipients, % of population aged 20-64, 2017 or latest

The population is ageing

12

Share of 55-64 year-olds in the population aged 20-64

10

12

14

16

18

20

22

24

1990 1995 2000 2005 2010 2015 2020 2025 2030

%

Norway OECD

Investment in skills and education is needed

13

Scores in the OECD’s PISA tests of the knowledge and skills among 15-year-olds

410

430

450

470

490

510

530

550

2000 2003 2006 2009 2012 2015 2018

A2. Mathematics

410

430

450

470

490

510

530

550

2000 2003 2006 2009 2012 2015 2018

A1. Reading

410

430

450

470

490

510

530

550

2000 2003 2006 2009 2012 2015 2018

A3. Sciences

Norway OECD Top 3 OECD Bottom 3 OECD

IMPROVING BUSINESS CONDITIONS

14

Businesses face high labour costs

15

0

10

20

30

40

50

60

POL ESP GBR ITA EA19 FIN DEU FRA SWE DNK NOR

Employers' social contributions and other labour costs paid by employer Wages and salaries (total)

Hourly labour costs, 2018, EUR

TACKLING CLIMATE CHANGE

16

Norway is facing a sizeable emission-reduction challenge

17

0

10

20

30

40

50

60

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

MtCO2-equivalent

Historical emissions, excl forestry

Projections under current implemented policies (decline 0.4 MtCO2 per year)

Trajectory to 2030 unconditional target: minus 40% (decline 1.6 MtCO2 per year)

Trajectory to 2030 conditional target: carbon neutrality (decline 2.3 MtCO2 per year)Paris agreement : 2030unconditional target is for 40% reduction below 1990 level by 2030

Greenhouse gas emissions

18

• Continued vigilance is needed given the heightened uncertainty from global developments and domestic risks stemming from property markets.

• Managing narrower fiscal space requires better value for money in public spending.

• Policy needs to better facilitate and motivate employment as to strengthen inclusiveness and economic potential.

KEY MESSAGES

More Information…

19

http://www.oecd.org/economy/norway-economic-snapshot/

OECD

OECD Economics

Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

EXTRA SLIDES

21

Well-being is high

22

Norway’s ranking amongst OECD countries

Jobs and earnings

Housing

Work-life balance

Health status

Education and skills

Social network

Civic engagement

Environmental quality

Personal security

Subjective well-being

Norway: 9

Norway: 2

Norway: 14

Norway: 8

Norway: 15

Norway: 8

Norway: 15

Norway: 2

Norway

Norway: 3

Greece

Israel

Mexico

Lithuania

Mexico

Korea

Chile

Turkey

Mexico

Portugal

Iceland

United States

Switzerland

Switzerland

Finland

Iceland

Australia

Iceland

Denmark

Bottom OECD performer Top OECD performer

Inequality remains low

23

Norway ranking amongst OECD countries

Gini (disposable income)

Gini (gross income)

P90/P50 disposable income decile ratio

P50/P10 disposable income decile ratio

Poverty rate before taxes and transfers

Poverty rate after taxes and transfers

Norway: 7

Norway: 7

Norway: 2

Norway: 5Norway: 14

Norway: 6

Mexico

Chile

Chile

Korea

France

United States

Slovak Republic

Slovak Republic

Slovak Republic

Czech Republic

Switzerland

Iceland

Bottom OECD performer Top OECD performer

Recommendations for macroeconomic stability and fiscal management

24

• Keep the policy rate on hold, while remaining vigilant to changing circumstances.

• Renew macroprudential mortgage regulations when they expire, consider removing time limitations.

• Reduce tax concessions on homeownership.

• Apply the fiscal rule conservatively over the longer term, keeping structural deficits below the 3% path in the near term.

• Strengthen value for money in public spending.

Recommendations for sick leave compensation and disability benefits

25

• Strengthen incentives to contain sick-leave absences.

• Intensify management efforts to address sick leave.

• In disability benefits, strengthen treatment and rehabilitation requirements and apply eligibility rules in general more strictly.

• Make early intervention a stronger theme of reform.

• Tighten medical assessment.

Recommendations for early retirement and pensions

26

• Align special pension provisions for certain occupational groups such as nurses, national defence and the police with the mainstream pension system.

• Index age-dimensions of the pension system to life expectancy, such as the retirement-age range of 62 to 75 years.

• Diminish the financial attractiveness of early retirement via disability benefits by putting the compensation for life-expectancy adjustment in pensions on hold.

A high share of youth do not complete upper secondary education

27

Percentage of 25-34 year-olds without upper secondary education, 2017 or latest

0

5

10

15

20

25

30

35

40

45

50

55

MEX

TUR

ESP

PRT

ITA

ISL

NOR

DNK

LVA

SWE

BEL

CHL

OECD GR

CEU

22 EST

NZL

NLD

FRA

LUX

HUN

DEU

GBR

AUS

AUT

FIN

IRL

LTU

ISR

USA

CHE

SVK

CAN

SVN

POL

CZE

KOR

Men Women

Recommendations to improve education and skills

28

• Press ahead with primary- and secondary-school curriculum reforms.

• Reduce apprentice remuneration to make it more attractive for employers to offer additional places.

• Link part of the employer subsidy to course completion by apprentices.

• Strengthen higher-education students’ incentives for timely course completion.

• Ensure that higher education institutions provide comprehensive study guidance and support services.

Expenditure on R&D has risen

29

Gross expenditure on R&D, percentage of GDP

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2010 2011 2012 2013 2014 2015 2016 2017

NOR USA EU15 OECD

There is room to improve regulation

30

OECD Product Market Regulation (PMR) indicatorScale 0-6 from least to most restrictive

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Overall Indicator Public Ownership Involvement inBusiness

Operations

Simplification andEvaluation ofRegulations

Admin. Burden onStart-ups

Barriers in Service& Network sectors

Barriers to Tradeand Investment

Norway Average of top 5 best performing OECD countries OECD

Recommendations for maintaining a successful business sector

31

• Strengthen business dynamics through better routes to recovery for businesses in difficulty, including lighter penalties for failed entrepreneurs.

• Continue to tackle weak points in business efficiency, including by paring back the extensive support for the agricultural sector.

Recommendations to combat climate change

32

• Pursue cost efficiency across sectors and borders in fulfilling Norway's Paris 2030-goal within the EU climate framework.

• Intensify green-house-gas reduction measures in particular in transport and agriculture. Review and reform road pricing and vehicle taxation, giving weight to social, fiscal and environmental considerations.