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As norway is a oil exporter country, the drop in oil prices will decrease the AD, thus reduces Real GDP and causes disinflation, or even deflation. However, i read a news article and it says the norway government is not concern about the deflation problem, as they don't think it will happen. And the wages growth rate remind unchanged while facing the fall in oil price. I don't savvy that...
Only a third of all Norway's exports comes from oil. Compare to Saudi Arabia where over 90% is oil-based. Ok, additional 20% comes from gas too. Anyway, the money is invested in the largest fund in the world, so Norway can well sit out until the prices rise again. Of course this will be a short-term blow.
Only a third of all Norway's exports comes from oil. Compare to Saudi Arabia where over 90% is oil-based. Ok, additional 20% comes from gas too. Anyway, the money is invested in the largest fund in the world, so Norway can well sit out until the prices rise again. Of course this will be a short-term blow.
But in the short run, it will still decrease the price level ??
And say if it takes the oil price a long time to rise, will the wages adjust itself to the demand in the market and return back to the original potential output? Which overcomes the wages rigidities.
As of April 2015, about 15,000 jobs in the oil & gas sector have been lost due to the low oil price. Still, unemployment is low in Norway. Most people do not work in the oil & gas sector.
The Norwegian Government Pension Fund of Norway (formerly The Government Petroleum Fund), the largest sovereign wealth fund in the world, controls ca 1.3 % of all the world's stocks. It has also invested a fraction (a few percent of total value) in real estate property. Some examples include part of Regent Street in London, Quensberry House in London etc, and in the same way the fund has invested in real estate in central areas of Paris, New York, Washington, San Francisco, Boston and other cities.
The value of the fund translates to ca 1.4 mill NKr for every Norwegian citizen.
Still, Norway will be hugely affected by the low oil price situation. Most industries on the West coast is extremely dependent on oil related either services or ship building. Norway has very little industry left that can provide revenue.
Unemployment is expected to rise significantly the next years.
There is not much of a dilemma, Norway is rich and while the impact will be felt, it is not even close to economically damaging to Norway, unless Norway is ran by complete idiots which is not the case. Sure, there will be layoffs, but that can happen in any sector given the economic circumstances.
A country with a trillion dollar wealth fund is not a country I would be overly concerned with in regards to economic problems. Even if the oil prices continue to stay low, Norway is well adapted enough to find new sources of revenue in other economic sectors.
Norway has it going good for them, I hope they never screw it up and other countries could really take note of what Norway does and try to emulate them.
There is not much of a dilemma, Norway is rich and while the impact will be felt, it is not even close to economically damaging to Norway, unless Norway is ran by complete idiots which is not the case. Sure, there will be layoffs, but that can happen in any sector given the economic circumstances.
A country with a trillion dollar wealth fund is not a country I would be overly concerned with in regards to economic problems. Even if the oil prices continue to stay low, Norway is well adapted enough to find new sources of revenue in other economic sectors.
Norway has it going good for them, I hope they never screw it up and other countries could really take note of what Norway does and try to emulate them.
So true! If only Alaska had used its extra revenues to put into a rainy day fund, instead of distributing dividends to all state residents, it might have been the Norway of the US. Investing all that money and growing the fund so that it could provide services, would have done a lot more for the state's poor residents than giving them grocery money once/year.
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