Only a small percentage of Norway’s land area is suitable for cultivation. However, the country is richly endowed with natural resources, including offshore petroleum and natural gas, various ores, fish, timber (70 250 km2 is covered by productive forests) and hydropower. Norway is the seventh largest producer of hydropower in the world (2011). The Norwegian hydropower sector has been designed to accommodate variations in the natural supply of water to power stations and to match production with seasonal changes in demand. Thanks in part to these resources, Norway has become one of the world’s richest countries per capita GDP, particularly in the offshore sector. This is partly due to its proximity to the important markets of Western Europe, its easy access to energy, its well-developed industrial sector, its political stability and its high educational standard.
Norwegian industries are diversified, and there is a free market economy and generally low trade barriers. A significant share of the Norwegian economy consists of service industries, including wholesale and retail industries, banking, insurance, engineering, transport and communications, and public sector services. In 2012, the services sector as a whole accounted for approximately 55% of GDP. Norway’s petroleum industries, including exploration and extraction, accounted for 27% of GDP and about 59% of exports. Manufacturing accounted for just below 8% of GDP.
The major manufacturing industries are food, beverages and tobacco, machinery and equipment, construction of ships and oil platforms, refined petroleum, chemicals and pharmaceuticals, fabricated metal products and computer and electrical equipment. There has been a marked division of the manufacturing industries in Norway. The industries delivering to the petroleum sector are experiencing outstanding growth, while more traditional export industries, are struggling due to low demand and high cost levels.
The discovery of substantial petroleum deposits in the Norwegian sector of the North Sea in the late 1960s and the start of North Sea oil production in 1971 has resulted in a well-developed petroleum sector. From the beginning of the 1970s this sector has accounted for the highest growth in the economy.
The exploitation of petroleum resources on the Norwegian continental shelf has had a major impact on the economy, and in 2012 Norwegian petroleum production totalled approximately 225 million standard m3 of oil equivalents (scm o.e.). Norway is the world’s seventh largest oil exporter and the third largest gas exporter.
In 2012 Norway's GDP amounted to NOK 2 097 billion, or approximately USD 499 billion (average rate of exchange in 2012). GDP was 3.1% higher in 2012 than in 2011 in constant prices. In 2012 total foreign assets amounted to NOK 7 978 billion and liabilities to NOK 5 007 billion, resulting in a net external surplus of NOK 2 971 billion.
Since 1970, annual economic growth has averaged 3.4% in the total economy and 2.8% in the mainland economy. Norway experienced strong economic growth from 2003 to 2007. Growth declined during the financial crisis and in the following year, but the impact of the crisis was less severe in Norway than in most other countries. During the last three years economic activity has increased and growth in mainland GDP reached 3.4% in 2012, driven mainly by petroleum investments, housing investments and private consumption. Growth in mainland GDP slowed somewhat towards the end of 2012 and in the first half of 2013. In the national budget for 2014 GDP for Mainland Norway is projected to increase by 2.2% this year and 2.7% next year.
The Government Pension Fund was established in 2006, and encompassed the former Government Petroleum Fund and the National Insurance Scheme Fund. The purpose of the Government Pension Fund is to facilitate the government savings needed to meet the rapid rise in public pension expenditures in the coming years, and to support long-term management of petroleum revenues.
The Ministry of Finance is responsible for managing the Government Pension Fund. The Ministry determines the general investment strategy of the Pension Fund and its ethical and corporate governance principles. Operational management of the Government Pension Fund Global has been delegated to Norges Bank and of the Government Pension Fund Norway to Folketrygdfondet.
The total market value of the Government Pension Fund was NOK 3 961 billion at the end of 2012, an increase of NOK 520 billion from 2011. Inflow of petroleum revenues amounted to NOK 276 billion, and positive developments in the financial markets increased the value of the Fund by approximately NOK 463 billion. Appreciation of the Norwegian krone, as measured against the currency basket of the Government Pension Fund Global, reduced the market value of the Fund by NOK 220 billion. However, changes in the Norwegian krone exchange rate do not affect the assessment of the Fund’s international purchasing power.
Total accrued taxes as a percentage of GDP are estimated at 41.7% for 2013 and the tax-to-GDP ratio is estimated at 45.3% when adjusted for petroleum activities. The main goals of the tax system are to raise public revenues, whilst contributing to equitable distribution, high value added and efficient utilisation of society’s resources.
After approaching the inflation target of the Central Bank in 2009 and 2010, inflation has dropped in the last two years and was down to 0.8% in 2012. Currency appreciation has kept prices on imported goods low, but growth in domestic inflation has also been moderate. In addition, electricity has contributed significantly to bringing down inflation in this period. In the national budget for 2014 inflation is expected to pick up from the low level last year to 1.9% this year and 1.6% next year. Core inflation, as measured by the CPI adjusted for changes in taxes and excluding energy (CPI-ATE), is expected to increase by 1.5% this year and 1.8% next year.
Consumer price index:
Annual rate of change in CPI
Annual rate of change in CPI-ATE
Norway is among the European countries experiencing the highest population growth (1.3% from 2011 to 2012). The growth derives from high immigration. Many immigrants (about 50%) claim that work is the reason for immigrating to Norway. As a parallel to high immigration, there has been high growth in employment. Since 2006 the number of employed persons has increased by about 10%. The employment rate in 2012, however, is roughly the same as in 2005. Immigration accounts for some 70% of the growth in employment after the EU enlargement in 2004 and for nearly all employment growth in 2012. The unemployment rate in Norway is low and virtually the lowest in Europe.1
Percentage of the total population in the labour force and unemployed persons as a percentage of the labour force: