OSLO, March 5 The OECD lowered its GDP growth
forecasts for Norway on Wednesday and called on the country to
limit government spending and implement reforms because its
current prosperity has masked a decline in competitiveness.
Growth on the mainland, which excludes Norway's vast
offshore oil and shipping sectors, is now seen at 2.5 percent
this year, a pick-up from last year's 2.0 percent but below an
earlier forecast for 3.0 percent, the OECD said in a country
"Current prosperity has tended to disguise a slowing of
underlying productivity growth," it said.
"Investment in the petroleum industry has risen very
strongly in recent years, but is expected to slow markedly,
while housing investment will also lose momentum."
With per-capita nominal GDP of about $100,000, Norway is one
of the richest nations in the world but years of record
investment in its oil sector have pushed costs sharply higher
across all sectors, dealing a blow to the competitiveness of
"There is thus a risk that, beyond the cyclical recovery,
future growth rates will be lower than those to which Norway has
been accustomed, even in the mainland economy," it added.
It said Norway needs to cut taxes further and warned that
Norway's flat wage structure, highly subsidized tertiary
education, and large numbers of people taking early retirement
through disability need to be addressed.
The OECD said a self-imposed limit on oil money spending is
appropriate and Norway should consider spending even less
because its structural budget deficit, or deficit excluding oil
tax income, will be close to 6 percent of GDP.
Norway is allowed to spend up to 4 percent of its massive
$840 billion sovereign wealth fund each year and actual spending
of the fund, which manages the country's surplus oil revenue, is
now closer to 3 percent.
But the OECD noted that the fund, worth about 200 percent of
mainland GDP, has grown so fast, absolute spending is increasing
even if it is declining as a percentage of the total.
"Norway should consider a longer-term policy of keeping the
non-petroleum deficit well below the 4 percent guideline in view
of the stronger-than-expected increase in the Government Pension
Fund Global (oil fund), uncertainties in the future rate of
return on the GPFG, pressure of demand in the economy, and
fiscal challenges due to ageing," it said.
(Reporting by Balazs Koranyi; Editing by Toby Chopra)