OECD Economic Survey of Norway 2019 Presentation

OECD ECONOMIC SURVEY OF NORWAY 2019 Sustaining wellbeing and employment Oslo, Monday 9 December 2019 http://www.oecd.org/economy/norway-economic-snapshot/

OECD Economics OECD

KEY MESSAGES • Continued vigilance is needed given the heightened uncertainty from global developments and domestic risks stemming from property markets. • Managing narrower fiscal space requires better value for money in public spending. • Policy needs to better facilitate and motivate employment as to strengthen inclusiveness and economic potential.

2

GDP growth is robust Real mainland GDP

Y-o-Y % change 3 2.5 2 1.5 1 0.5 0

2013

2014

2015

2016

2017

2018

2019 3

Growth will ease in the coming quarters Mainland GDP growth will be around 1.7% by 2021 (Annual growth rates, unless specified)

Mainland GDP Private consumption Government consumption Gross fixed capital formation Exports of goods and services Imports of goods and services Unemployment rate (% of labour force) Consumer price index

2018

2.2 1.9 1.4 2.8 -0.2 1.9 3.8 2.7

2019

2.5 1.8 2.2 4.3 1.6 5.45 3.4 2.3

2020

2.0 1.9 1.9 3.3 2.6 1.

3.2 2.0

2021

1.7 1.9 1.8 2.1 3.1 2.0 3.2 2.2

4

Living standards remain high GDP per capita, U.S. dollars, purchasing-power parity basis 80 70 60 50 40 30 20 10 0

5

Well-being is high Norway’s ranking amongst OECD countries

Top OECD performer

Bottom OECD performer Greece Jobs and earnings Israel Housing Mexico Work-life balance Lithuania Health status Mexico Education and skills Korea Social network Chile Civic engagement Turkey Environmental quality Mexico Personal security Portugal Subjective well-being

Norway: 9

Iceland Norway: 2 United States Switzerland

Norway: 14 Norway: 8 Norway: 15

Switzerland Finland

Norway: 8 Norway: 15

Iceland Australia

Norway: 2

Iceland Norway

Norway: 3

Denmark

6

Inequality remains low Norway ranking amongst OECD countries

Top OECD performer

Bottom OECD performer Mexico Gini (disposable income) Chile Gini (gross income) Chile P90/P50 disposable income decile ratio Korea P50/P10 disposable income decile ratio France Poverty rate before taxes and transfers United States Poverty rate after taxes and transfers

Norway: 7

Slovak Republic

Norway: 7

Slovak Republic

Slovak Republic Norway: 2 Norway: 5

Czech Republic Switzerland

Norway: 14 Norway: 6

Iceland

7

MACROECONOMIC AND FISCAL MANAGEMENT

8

House prices continue to rise Nominal house price index, 2010 = 100, seasonally adjusted

200 180

Oslo

Norway

160 140 120 100 80 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

9

Commercial real estate prices are rising steeply Estimated real selling prices per square meter for prime office space in Oslo, index 1998=100

10

Non-oil deficits can no longer increase rapidly Non-oil deficits and projection of 3 percent of the value of the oil fund % of trend mainland GDP 12

Structural non-oil deficit

3 percent path

10 8 6 4 2 0

2000

2010

2020

2030

2040 11

Recommendations for macroeconomic stability and fiscal management • Keep the policy rate on hold, while remaining vigilant to changing circumstances.

• Renew macroprudential mortgage regulations when they expire, consider removing time limitations.

• Reduce tax concessions on homeownership.

• Apply the fiscal rule conservatively over the longer term, keeping structural deficits below the 3% path in the near term.

• Strengthen value for money in public spending.

12

MAINTAINING HIGH EMPLOYMENT

13

Labour force participation has been falling Labour force participation rate, 15-64 years %

84

Norway

Average of top 5 OECD countries

83 82 81 80 79 78 77 76

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

14

Sickness absence from work is high Sickness absences of full-time dependent employees, average number of days per year, 2018 Days 25 20 15 10

0

GRC TUR HUN LTU USA ITA LVA ISL IRL CAN EST GBR SVK CHE POL DNK LUX OECD NLD CZE AUT ESP SWE SVN FRA BEL DEU PRT FIN NOR

5

15

A substantial share of the population is on disability benefit Disability benefits recipients, % of population aged 20-64, 2017 or latest % 14 12 10 8 6 4

NOR

EST

SVN

NLD

ISL

HUN

BEL

SVK

IRL

CZE

FIN

GBR

LVA

USA

DNK

SWE

LUX

AUS

ISR

POL

DEU

CAN

CHE

ESP

PRT

NZL

0

AUT

2

16

Recommendations for sick leave compensation and disability benefits • Strengthen incentives to contain sick-leave absences.

• Intensify management efforts to address sick leave.

• In disability benefits, strengthen treatment and rehabilitation requirements and apply eligibility rules in general more strictly.

• Make early intervention a stronger theme of reform.

• Tighten medical assessment.

17

The population is ageing Share of 55-64 year-olds in the population aged 20-64 % 24

Norway

OECD

22 20 18 16 14 12 10

1990

1995

2000

2005

2010

2015

2020

2025

2030 18

Recommendations for early retirement and pensions • Align special pension provisions for certain occupational groups such as nurses, national defence and the police with the mainstream pension system. • Index age-dimensions of the pension system to life expectancy, such as the retirement-age range of 62 to 75 years. • Diminish the financial attractiveness of early retirement via disability benefits by putting the compensation for life-expectancy adjustment in pensions on hold.

19

Investment in skills and education is needed Scores in the OECD’s PISA tests of the knowledge and skills among 15-year-olds

20

A high share of youth do not complete upper secondary education Percentage of 25-34 year-olds without upper secondary education, 2017 or latest 55

Men

50

Women

45 40 35 30 25 20 15 10

KOR

CZE

POL

SVN

CAN

SVK

CHE

USA

ISR

LTU

IRL

FIN

AUT

AUS

GBR

DEU

HUN

LUX

FRA

NLD

NZL

EST

EU22

GRC

OECD

CHL

BEL

SWE

LVA

DNK

NOR

ISL

ITA

PRT

ESP

TUR

0

MEX

5

21

Recommendations to improve education and skills • Press ahead with primary- and secondary-school curriculum reforms.

• Reduce apprentice remuneration to make it more attractive for employers to offer additional places.

• Link part of the employer subsidy to course completion by apprentices.

• Strengthen higher-education students’ incentives for timely course completion.

• Ensure that higher education institutions provide comprehensive study guidance and support services.

22

IMPROVING BUSINESS CONDITIONS

23

Expenditure on R&D has risen Gross expenditure on R&D, percentage of GDP 3.0 2.5 2.0 1.5 1.0 NOR

USA

EU15

OECD

0.5 0.0

2010

2011

2012

2013

2014

2015

2016

2017 24

Businesses face high labour costs Hourly labour costs, 2018, EUR 60 Employers' social contributions and other labour costs paid by employer

50

Wages and salaries (total)

40 30 20 10 0

POL

ESP

GBR

ITA

EA19

FIN

DEU

FRA

SWE

DNK

NOR 25

There is room to improve regulation OECD Product Market Regulation (PMR) indicator Scale 0-6 from least to most restrictive 3.0

Norway

Average of top 5 best performing OECD countries

OECD

2.5 2.0 1.5 1.0 0.5 0.0

Overall Indicator

Public Ownership

Involvement in Business Operations

Simplification and Admin. Burden on Barriers in Service Barriers to Trade Evaluation of Start-ups & Network sectors and Investment Regulations 26

Recommendations for maintaining a successful business sector • Strengthen business dynamics through better routes to recovery for businesses in difficulty, including lighter penalties for failed entrepreneurs. • Continue to tackle weak points in business efficiency, including by paring back the extensive support for the agricultural sector.

27

TACKLING CLIMATE CHANGE

28

Norway is facing a sizeable emission-reduction challenge Greenhouse gas emissions MtCO2-equivalent 60 50 40 30 20

Historical emissions, excl forestry Projections under current implemented policies (decline 0.4 MtCO2 per year) Trajectory to 2030 unconditional target: minus 40% (decline 1.6 MtCO2 per year) Trajectory to 2030 conditional target: carbon neutrality (decline 2.3 MtCO2 per year)

10 0 2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Paris agreement : 2030 unconditional target is for 40% reduction below 1990 level by 2030

2022

2024

2026

2028

2030 29

Recommendations to combat climate change • Pursue cost efficiency across sectors and borders in fulfilling Norway's Paris 2030-goal within the EU climate framework. • Intensify green-house-gas reduction measures in particular in transport and agriculture. Review and reform road pricing and vehicle taxation, giving weight to social, fiscal and environmental considerations.

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This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

OECD Economics OECD

http://www.oecd.org/economy/norway-economicsnapshot/ 31