Press Release

March 7 1997

The Norwegian Long Term Programme 1998-2001

The Norwegian Labour Party government launched its Long Term Programme 1998-2001 on Friday 7 March focusing on challenges facing the Norwegian economy in maintaining medium term stability and preparing for declining oil revenues, rising pension expenditures and potentially stronger environmental constraints over the longer term.

The policy framework:

The Norwegian economy is in a strong cyclical upswing, which has lasted for more than three years. Growth, job creation, unemployment, inflation, and external and fiscal balances are among the best in the industrial world.

To meet the challenges ahead, the Government will develop the Solidarity Alternative further - a policy framework which has served well in the current program period:

• Cooperation with the social partners on incomes policies to keep nominal wage growth low and and on par with trading partners
• Active labour market policies to prevent long term or permanent unemployment
• Adult training and education to ensure a flexible labour force with updated qualifications
• Measures to increase labour market participation among groups of young people, disabled, single parents and elderly
• Structural policy is designed to improve the growth potential of the economy and enhance the competitiveness of mainland industries.

Guidelines for fiscal policy in the coming four years period are thus to avoid crowding out the competitive mainland sector and to keep public expenditure at a level which is sustainable when oil revenues begin to decline.

Monetary policy is oriented towards the stability of the Krone's exchange rate vis a vis European currencies.

The government aims at a further reduction of unemployment, without overheating the economy, accumulating a sizeable State Petroleum Fund and maintaining a strong and competitive mainland economy.

Implementation of new reforms are explicity said to depend on the performance of the economy. Priority is given to:

• welfare services for old people
• health care
• nursery schools
• adult training and education
• development aid
• culture
• information technology

Macroeconomic projections:

Medium term macroeconomic projections indicate:

• Total GDP is estimated to increase on average by 2 3/4 per cent per annum to 2001, and by 3/4 per cent per annum from 2001 to 2005. Mainland GDP is assumed to grow by an average annual rate of 2 per cent to 2005.
• Employment is estimated to increase by an average annual rate of 1 per cent to 2001, and by 1/2 per cent from 2001 to 2005. The unemployment rate is projected to decline from 4,9 per cent in 1996 to 4 per cent in 2001.
• Wage inflation is projected to be below or on par with that of the trading partners.
• The State's net cash flow from petroleum activities is estimated to reach a peak level of 10 per cent of GDP in 2001, and then gradually decline
• The State Petroleum Fund may exceed NOK 400 billion by 2001. The projections are based on an oil price of NOK 115 per barrel.