Norway - Overview of economy

Given the country's size, Norway's economy is small by western European standards but is nevertheless considered among the healthiest in the world, largely due to its positive trade balance and lack of foreign debt . The country is widely hailed as an exemplary and prosperous combination of a social welfare state , dynamic free market activity, and active government intervention. Its gross domestic product (GDP) per capita is among the world's highest, at US$28,100 in 1999, or about 18 percent higher than the western European average, ranking second only to tiny Luxembourg's in western Europe.

The country is rich in natural resources, including offshore oil and natural gas fields in the North Sea, abundant hydropower in the mountains, fish, forests, and minerals. It is a major exporter of oil and natural gas, other raw materials, and semi-processed goods—all of which make it highly dependent on international oil and gas prices for its revenues. In 2000, only Saudi Arabia exported more crude oil than Norway. But other major industries are prospering too, such as information technologies, fishing, pulp and paper products, and shipbuilding. The latter industry is under increasingly heavy competition from overseas (mostly Asian) shipyards, and fishing is heavily subsidized by the state. Norway's overall trade balance is characterized by an unusually large traditional surplus (of over US$18 billion in 1999-2000), it has no foreign debt, and is a major international net creditor and donor to the developing countries. Total foreign direct investment in Norway was estimated at about US$22.7 billion in 1998, according to the central bank of the country. The United States is Norway's leading foreign investor, followed by neighboring Sweden and other European Union (EU) members.

For quite some time, Norway was preparing for EU membership, but, contrary to its Nordic neighbors Sweden and Denmark, Norway's citizens decisively opted to stay out of the EU in 2 referenda held in 1972 and 1994. In doing so, Norway apparently hopes to preserve in relative isolation its unique economic advantages and high living standards. Norway is still linked to the EU, however, through the European Economic Area (EEA) agreement that granted favorable access for most Norwegian non-agricultural products to the EU markets. Norway is improving its access to the European markets also by adopting internally most of the EU regulations. But its major focus at the turn of the century is rather on curbing extensive welfare spending and planning for the time when petroleum and natural gas reserves will be depleted. This is expected in less than 20 years for oil and less than 90 years for natural gas reserves at the present level of extraction and if no new fields are located.