Long-Term Perspectives for the Norwegian Economy

- The White Paper on long-term perspectives addresses key challenges facing the Norwegian economy in coming decades, including global warming, globalisation and an ageing population. The paper also presents the Government’s strategy to meet these challenges that includes further enhancement of our welfare model and continued support of strong global institutions. It is important not to lose sight of the challenges to long-term sustainable development in the midst of the current economic turmoil, says Minister of Finance Kristin Halvorsen.

Global environmental and climate problems
The current economic growth pattern gives raise to substantial environmental challenges. Human-induced climate change is probably the largest of these and must be met with broad-based and ambitious international agreements. Norway and other industrialised countries do have a particular responsibility to ensure that the necessary emission reductions can be achieved without limiting developing countries’ potential for raising their standards of living. To achieve sufficiently ambitious and binding climate agreements is not easy, but nevertheless paramount if we are to avoid the serious consequences induced by increased global warming.

– Norway presses forward for the implementation of a new ambitious agreement in 2012 that includes all countries and all sectors. Norway has also stated its intention to become carbon-neutral in 2030 at the latest, as part of a global and ambitious climate agreement, says finance minister Kristin Halvorsen.

The opportunities and challenges of globalisation
Norway has benefited significantly from globalisation. Access to international markets has enabled us to improve living standards by utilising our comparative advantage. At the same time increased global competition and offshore outsourcing creates adjustment challenges. So far, the Norwegian economy has proven to be flexible and adaptable to changing market conditions. This is one of the keys behind Norway’s stellar performance the last decades.

The international financial crisis illustrates how closely countries have become intertwined, and how also negative events rapidly spread across national borders. The Government believes that the best response to the challenges posed by a more closely integrated world is to further develop the fundamental features of our social model. Active labour market policy and a publicly financed safety net make it easier to tackle the adjustments required by changing economic conditions.
– As a small and open economy, it is also in our interest to work for strong global institutions which advocate uniform rules and regulations, says Halvorsen.

Ageing population in Norway
From about 2010 onwards the proportion of elderly in the population will rise steeply. Population ageing will cause spending on pensions and on health, nursing and care services to increase relative to both GDP and government revenues. Long-term budget projections illustrate a need for action to curb public spending or to increase revenues ahead, even when assuming that the quality and scope of public services remain at current levels.

A continuation of the Norwegian welfare model may require the expansion of key public services as expectations rises in response to higher income in the society. This will further increase the long-term challenges facing public finances. It is imperative to raise labour supply to ensure the expedient use of public sector resources, and to adapt the production of public services to peoples’ needs. The pension reform of 2007 has an important role in bringing about a more sustainable pension system that also stimulates increased labour force activity. The reform creates a closer link between pensions on the one hand and length of working life and hours worked on the other.

A well-functioning social model
Norway and the other Scandinavian countries enjoy a high level of material prosperity, high labour force participation and an equitable income distribution. Equal access to basic public welfare services is an important aspect of the Scandinavian welfare model. Comprehensive benefit schemes guarantee a good standard of living for individuals of old age and in periods of illness, disability, pregnancy and unemployment. At the same time, Norway is among the industrialised countries with the highest economic growth over the last 15 years.
– A further improvement of our social model is a key element in the Government’ s strategy to tackle the challenges ahead, concludes Kristin Halvorsen.

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Read more: An english summary of the white paper on long-tem perspectives for the Norwegian economy