Norway WT/TPR/S/205
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I. ECONOMIC ENVIRONMENT 
(1) OVERVIEW  
1. Norway has one of the highest living standards in the world, with a per capita GDP of about 
US$82,185, and ranks second in th e UNDP Human Development Index.1  Norway’s largely open 
trade regime has allowed it to reap substantial gain s from its participation in international trade during 
the period under review, benefiti ng, in particular, from both lowe r import prices and higher export 
prices (particularly for hydrocarbon products).  Th e improved terms of trade and rising productivity 
boosted domestic demand, which in turn underpi nned strong economic growth, with Mainland GDP 
expanding at an average of 5.2% per year over 2004- 07.  Activities related to petroleum and natural 
gas extraction have continued to be of central importance for Norway's economy, accounting for 21% 
of GDP, 25% of public revenues and 58% of merchandise exports in 2007. 
2. Inflation has been kept in check, due in part to declining import prices, increasing domestic 
competition and large inflows of foreign labour.  Muted inflationary pressure has permitted the 
Central Bank to keep interest rates low, which has further supported economic expansion.  Fiscal 
policy has been associated with large budget surp luses.  Moreover, in order to smooth economic 
fluctuations, Norway has continued to save its budg et surpluses in a fund ma intained abroad, which 
has attenuated appreciating pressures on the exchange rate.  However, there are signs that real GDP growth has reached its potential, and that economic growth will slow down.  The historically high 
level of household debt also poses an increasi ng risk as credit conditions have tightened. 
(2) S
TRUCTURE OF THE ECONOMY , OUTPUT AND EMPLOYMENT  
3. In terms of contribution to GDP, the most important sector in Norway is petroleum and 
natural gas extraction, followed by real estate and business services, and "other public and private 
services", which includes service activities incidental to oil and gas extraction (Table I.1).  The contribution of agriculture, forestry and fishing GDP has remained stable sin ce Norway's last Review, 
while the contribution of petroleum and gas extract ion has fallen by approximately 30% due to an 
equivalent decrease in the volume of production (C hapter IV(5)).  The share of the manufacturing 
sector has increased slightly, largely as a conse quence of higher investments in the machinery and 
other equipment subsector.  The weight of the servi ce sector as a whole has continued to increase, to 
around 66% of GDP in 2007. 
4. Following a period of subdued growth between 2000 and 2003, real GDP grew at an annual 
average rate of 2.8% between 2004 and 2007 (Table I.2) .  Over the same period, average real growth 
for Mainland GDP
2 was 5.2%, which, according to the IMF,  has been above potential (estimated at 
2.5-3%).3  Expansion in Mainland GDP has been driven  by productivity growth, supportive monetary 
conditions and a favourable interna tional environment, particularly high world prices for petroleum 
and gas products and metals.  High world prices of  hydrocarbons boosted the profits of the petroleum 
and gas industry as well as fiscal revenues, which in turn provided a further impulse to mainland 
activity via higher demand for equipment and bus iness services, and higher public spending. 
                                                      
1 UNDP online information.  Viewed at:  http://hdr.undp.org/en/statistics/. 
2 Mainland GDP is all domestic product except for extraction of petroleum and gas, services activities 
incidental to oil and gas, transport via pipelines, and ocean transport. 
3 IMF (2007a).   WT/TPR/S/205 Trade Policy Review 
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Table I.1  
Basic economic indicators, 2004-08  
 2004 2005 2006 2007 2008a 
Gross domestic product (GDP)      
Real GDP (NKr billion)b 1,903.7 1,946.6 1,995.8 2,067.8 n.a. 
Real GDP (US$ million)b 282,562 302,029 310,968 352,620 n.a. 
Current GDP (US$ million) 258, 731 301,883 335,06 8 389,326 n.a. 
Nominal GDP per capita (US$) 56,168 65,058 72,210 82,185 n.a. 
Sectoral structure of GDP (% of total value added)c      
Primary sector 28.8 26.7 24.9 23.1 23.9 
Agriculture, hunting and forestry 0.9 0.8 0.8 0.8 0.9 
Fishing and fish farming 0.7 0.7 0.7 0.8 0.8 
Mining and quarrying 0.2 0.2 0.2 0.3 0.3 
Petroleum and gas extraction 27.0 25.0 23.2 21.2 21.9 
Manufacturing 9.5 9.8 10.2 10.4 10.4 
   Machinery and other equipment 2.3 2.5 2.9 3.0 3.1 
   Food products, beverages a nd tobacco 1.9 1. 8 1.8 1.8 1.7 
Services  61.7 63.5 64.9 66.5 65.8 
Electricity, gas and water 2.0 2.6 2.3 2.4 2.3 
Construction 4.5 4.4 4.5 4.6 4.7 
Wholesale and retail trade, and hotel and restaurants 9.2 9.4 10.0 10.6 10.7 
Transport and communications 7.7 7.7 7.8 7.9 8.0 
Financial intermediation 3.7 3.9 4.4 4.7 4.8 
Real estate and business se rvices 13.2 13.7 14.0 14.3 14.3 
Public administration and defence 4.7 4.6 4.6 4.5 4.6 
Education 4.4 4.4 4.4 4.4 4.4 
Other public and private servicesd 12.1 12.6 13.0 13.0 11.9 
Total valued added 100.0 100.0 100.0 100.0 100.0 
Employment (% of total working population)e      
Agriculture, hunting, forestry and fishing 3.5 3.3 3.3 2.9 2.8 
Petroleum and gas extraction 1.3 1.4 1.3 1.4 1.4 
Manufacturing and mining 11.7 11.7 11.6 11.5 11.5 
Electricity, gas and water 0.7 0.7 0.7 0.7 0.7 
Construction 7.0 6.9 7.1 7.4 7.3 
Wholesale and retail, and hotels a nd restaurants 18.2 18.4 17.8 17.4 17.1 
Transport and communications 6.5 6.6 6.6 6.5 6.3 
Financial intermediation 2.1 2.2 2.3 2.3 2.2 
Real estate and business se rvices 9.8 10.1 10.9 11.0 11.5 
Public administration and defence 6.3 6.0 6.1 6.3 6.3 
Education 8.6 8.3 8.2 8.8 8.9 
Other public and private servicesd 24.0 24.2 24.2 23.9 23.8 
Memorandum item      
Population ('000) 4,606 4,640 4,681 4,737 4,765 
Unemployment rate (annual average)f 4.5 4.6 3.4 2.5 2.5 
n.a. Not applicable. 
a 1st quarter figures. 
b Seasonally adjusted figures at constant 2005 market prices. c Seasonally adjusted figures at constant 2005 basic prices. 
d Including service activities incident al to oil and gas extraction. 
e The methodology applied to the Labour Force Survey was revised in 2006. f Unemployment is defined as persons with  no income-earning work, but who are seeking work and can start work immediately, as 
a percentage of the labour force. 
Source : WTO Secretariat, based upon informati on from Statistics Norway and Norges  Bank online information.  Viewed 
at:  http://www.ssb.no, a nd http://www.norges-bank.no/. Norway WT/TPR/S/205
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5. From an expenditure standpoint, GDP growth has been primarily driven by gross capital 
formation (in 2004-05) and consump tion (in 2006-07).  Gross capital formation increased by around 
10% per year over 2004-07 and was the main driv ing force behind the first phase of the economic 
upturn (Table I.2).  Investment growth in manufac turing was especially strong, particularly in the 
shipbuilding and other transport equipment subsect ors.  General government and the petroleum and 
gas sector represented, on average, 15% and 22%  of total fixed investment, respectively.4 
6. Private consumption grew at an average a nnual rate of 5.1% over 2004-07 (Table I.2), 
underpinned by the expansion of disposable in come and borrowing.  Nominal wages, which 
contribute to approximately 70% of disposable in come, grew at an average of 4.5% during 2004-06, 
but rose by 7.0% in 2007 due to a tight labour market and high corporate earnings;  property income 
rose by an average of 8%.  On the other hand, low market interest rates fuelled a rapid and prolonged 
consumer credit growth, including mortgage lending.  However, a significant rise in borrowing rates 
in 2007 may induce households to save more, thus reducing private consumption.5  Public 
consumption also increased during the period, particul arly in 2006-07, reflecting to a large extent the 
rise in petroleum and gas related public revenues.  
Table I.2  
GDP growth measured by expenditure, 2004-08  
 2004 2005 2006 2007 2008a 
Real annual growth rate (%)      
GDP  3.6 2.3 2.5 3.7 0.2 
Total consumption 3.9 3.0 4.1 5.5 0.4 
  Private consumption 5.2 4.1 4.7 6.4 0.3 
  Public consumption 1.3 0.8 2.9 3.6 0.7 
Gross capital formation 18.0 13.1 9.6 6.8 -5.3 
  Gross fixed capital formation 10.0 13.2 7.3 9.3 -4.8 
  Variation in stocks 160.8 11.6 27.9 -9.6 -8.5 
Exports of goods and services 0.5 0.1 0.3 2.8 1.0 
Imports of goods and services 8.2 8.1 8.0 8.7 -2.8 
Real GDP, composition (%)      
Total consumption 61.9 62.3 63.3 64.5 64.4 
  Private consumption 41.7 42.4 43.3 44.6 44.4 
  Public consumption 20.2 19.9 20.0 19.9 19.9 
Gross capital formation 19.2 21.2 22.7 23.3 24.3 
  Gross fixed capital formation 16.9 18.8 19.6 20.7 20.7 
  Change in stocks 2.2 2.4 3.1 2.6 3.6 
Exports of goods and services 45.6 44.6 43.7 43.5 43.2 
Imports of goods and services 26.6 28.2 29.7 31.1 31.8 
a 1st quarter figures. 
Source : WTO Secretariat, based on info rmation from Statistics Norway.  Viewed at:  http://www.ssb.no. 
7. The public sector, including education services, is th e largest employer in Norway (Table I.1).  
Agricultural, forestry and fishing sectors togeth er employ less than 3% of the total working 
population;  the share of oil and gas extraction remained stable at around 1.4% during 2004-07. 
                                                      
4 Statistics Norway online information.  Viewed at:  http://www.ssb.no/. 
5 Norges Bank (2008b) and IMF (2007a).  WT/TPR/S/205 Trade Policy Review 
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8. Norway's unemployment rate has fallen sharpl y since 2003, to 2.5% as at April 2008, despite 
a high net influx of workers;  approximately 40%  of the immigrant population in December 2007 
entered Norway during the review period.  The ra pid increase in foreign workers is linked to both 
Norway's low unemployment rate and the accession of labour-abundant countries to the European 
Communities (EC), and subsequently to the EEA, in 2004.  As from 2008, workers from most new 
EC countries can start working as soon as they have  accurately filled in and submitted the application 
for a work permit.  Moreover, the Government has introduced proposals at the Storting to further ease 
restrictions on immigrants, including those from non- EEA countries;  this should, in the short-term, 
alleviate pressures on the labour market.  The Norw egian labour market has strong participation rates 
at all ages, but the average number of hours worked in Norway is one of the lowest among OECD 
countries.6   
9. Although Norway's average productivity growth of around 1.4% per year during 2004-06 was 
slightly lower than  the OECD average7, its labour productivity (measured as GDP per hour worked) is 
still the highest among OECD countries.8  But, innovative activity seems low by international 
standards as suggested by below-average R&D intensity.9  According to Norges Bank (the Central 
Bank), productivity growth seems rather to be th e result of a homogeneous and high level of human 
capital, which allows the wide adoption of importe d information and communication technologies.  In 
this respect, Norges Bank has noted that the shor tage of qualified labour may impair productivity 
growth in the years to come.10 
(3) MONETARY AND EXCHANGE RATE POLICIES  
10. Norges Bank is responsible for the conduct of monetary policy.  The bank is mandated to 
follow a "flexible inflation targeting regime", i.e. a policy oriented towards low and stable inflation 
but also aimed at stabilizing output and employment .  The operational objective is to maintain the 
annual inflation rate, as measured by  the consumer price index (CPI), within a one percentage point 
range around the 2.5% target.  A lthough Norges Bank has formally stated that it will report to the 
Ministry of Finance if inflation deviates from its target, this is not required by law. 
11. Every four months Norges Bank issues a repor t in which it assesses the economic outlook and 
adopts a monetary policy strategy for the period up to  the next report.  Its most important monetary 
policy instrument is the setting of interest rate s on banks' deposits in Norges Bank (the key policy 
rate), which is normally done at meetings held every six weeks.  Norges Bank operates daily deposit 
and lending facilities to ensure that the key policy rate actually influences short-term money market 
rates.  Banks are not required to maintain minimum reserves with Norges Bank.11 
12. Since Norway's last Review, the inflation targe ting regime has been successful in keeping the 
inflation rate within its target band.  There is  evidence to suggest that the Norwegian economy is 
highly sensitive to changes in import prices.12  Therefore, falling import prices (-4.4% accumulated 
                                                      
6 OECD (2007c). 
7 The authorities note that productivity figures are skewed downwards due to decreases in petroleum 
production.  If measured by Mainland GDP per hours worked, productivity growth was around 2.7% per year during 2004-06.  
8 OECD online information.  Viewed at:  h ttp://www.oecd.org/topicstatsportal/0,3398,en_2825_ 
30453906_1_1_1_1_1,00.html. 
9 OECD (2007c). 
10 Norges Bank (2007b). 
11 Norges Bank (2001) and (2007a).   
12 OECD (2007c). Norway WT/TPR/S/205
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during 2004-07)13, accentuated by an appreciating exchange rate, helped to keep inflation low;  
moderation in wage costs and increased competition also played an important role (Chapter III(4)(ii)).
14  The credibility of the regime also see ms to be high, as surveys suggest that 
medium-term inflation expectations remain  anchored at the 2.5% policy target.15 
13. However, in view of increasing demand pressure  in the labour market and high levels of 
capacity utilization, Norges Bank has been tightening monetary conditions, raising interest rates on 16 
occasions since mid-2005 taking the key policy rate to 5.75% in June 2008 (Table I.3).  The CPI rose 
sharply during 2007 due mainly to increases in electricity prices. 
Table I.3  
Main monetary indicators, 2004-08  
 2004 2005 2006 2007 2008a 
Monetary and credit aggregates  (growth rates)       
M1 (end of the period) 10.4 17.0 17.3 12.6 6.1 
M2 (end of the period) 7.5 11.7 23.0 12.3 11.1 
Credit to the private sector  (end of the period) 8.6 13.2 14.3 13.8 .. 
Nominal interest ratesb      
Key policy rate (end period) 1.75 2.25 3.50 5.25 5.25 
NIBOR overnight ratec 2.17 2.25 3.11 4.76 5.68 
Yield on 12-month Treasury bills 2.01 2.37 3.37 4.85 5.10 
Yield on 10-year Government Bonds 4.36 3.74 4.07 4.78 4.40 
Inflationd      
Consumer price index (CPI) 1.1 1.9 2.2 2.8 3.5 
Producer price index (PPI)  3.7 8.5 3.6 12.7 4.2 
Exchange rate      
Nominal exchange rate (US$/NKr)b 0.148 0.155 0.155 0.171 0.189 
Nominal exchange rate (EUR/NKr)b 0.119 0.125 0.124 0.125 0.126 
Real effective exchange rate (index 1995=100)e 100.9 104.9 105.1 .. .. 
.. Not available. 
a 1st quarter figures. 
b Annual average of daily observations. 
c Norwegian inter bank offered rate. d Twelve-month rate at the end of the period. 
e IMF staff estimates, based on CPI statistics. 
Source : WTO Secretariat, based on information from Statistics Norway and Norges Bank. 
14. Although Norges Bank has the authority to interven e in the foreign exchange rate market, it 
did not do so during the period under review.  Inst ead, the Norwegian krone was allowed to float, 
appreciating against the U.S. dollar by around 15% in nominal terms between 2004 and 2007;  the nominal exchange rate with respect to the euro has remained stable since 2005 (Table I.3).  The real 
effective exchange rate also appreciated during 2 004-06 (latest year available), but arguably to a 
lesser extent than would be expected given Norway 's terms of trade gains due to high petroleum 
prices.  Pressure for the krone to appreciate is atte nuated by the transfer abroad of most oil revenues 
(section (5) below). 
                                                     
 
13 Statistics Norway online information.  Viewed at:  http://www.ssb.no/. 
14 IMF (2007a).   
15 Norges Bank (2008b). WT/TPR/S/205 Trade Policy Review 
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(4) FISCAL POLICY  
15. Norway's fiscal policy continues to be character ized by the generation of large surpluses, with 
the General Government achieving fiscal surpluses of over 15% of GDP (Table I.4).  The Ministry of Finance is responsible for preparing the annua l budget and for defining the strategy of the 
Government Pension Fund – Global (GPF), where the surplus of central government accounts is 
invested. 
Table I.4  
Fiscal accounts of the non -financial General Governmenta, fiscal years 2004-08  
(Percentage of current GDP) 
 2004 2005 2006 2007 2008b 
Total revenue 53.8 54.6 56.5 55.5 55.0 
    Current revenue  53.7 54.5 56.4 55.4 55.0 
        Property income 9.9 10.5 12.1 11.9 .. 
            Extraction of petroleum (SDFI)c 4.4 5.1 5.8 4.8 .. 
            Otherd 5.5 5.4 6.3 7.1 .. 
        Tax revenue 43.2 43.5 43.9 43.0 .. 
            Value added tax and investment levy 8.1 7.9 8.0 8.2 .. 
    Customs duty 0.1 0.1 0.1 0.1 .. 
            Taxes on extraction of petroleum 0.3 0.2 0.3 0.2 .. 
            Taxes on fuel 0.5 0.4 0.4 0.4 .. 
            Income tax 21.0 22.3 22.9 21.6 .. 
    Income tax from extraction of petroleum 7.6 9.5 10.2 8.4 .. 
    Social security contributions 9.4 8.9 8.8 9.0 .. 
            Other taxes on production and imports 3.8 3.7 3.4 3.5 .. 
        Other current transfers 0.5 0.5 0.4 0.4 .. 
    Capital revenue 0.1 0.1 0.1 0.1 .. 
II. Total expenditure 42.6 39.5 38.1 38.1 36.0 
Current expenditure  41.6 38.5 36.9 36.9 35.0 
Property expenditure 1.4 1.2 1.5 1.2 .. 
Transfers to the private sector 18.0 16.5 15.4 15.2 .. 
    Subsidies 2.2 2.1 1.9 1.9 .. 
        Pensions 8.4 8.0 7.6 7.7 .. 
 Social transfers to households 7.4 6.4 5.9 5.6 .. 
         Other current transfers 0.8 0.8 0.8 0.8 .. 
     Operating expenditure 21.4 19.9 19.2 19.7 .. 
             Wages and salaries 13.2 12.4 11.9 12.2 .. 
             Other opera ting expenditures 8.2 7.5 7.3 7.5 .. 
      Capital expenditure 1.1 1.0 1.1 1.2 1.0 
Current saving 12.1 16.0 19.5 18.5 20.0 
III. Total surplus or defi cit 11.2 15.1 18.4 17.4 19.0 
Memorandum item      
General government structural non-oil fiscal 
balance/Mainland GDPe -3.0 -3.3 -3.4 -3.6 .. 
Central government total debt (U S$ million) 47,609 51,843 41,970 45,281 .. 
Central government total debt/GDPf 18.4 17.2 12.5 11.6 .. 
.. Not available. 
a Includes the central and municipal government s, but excludes state-owned enterprises. 
b Preliminary 1st quarter figures. 
c State's Direct Financial Interest (SDFI) refers to State interests in petroleum and gas (Chapter IV(5)(ii)).  d Includes returns from the G overnment Global Pension Fund. 
e This measure excludes oil revenues such as SDFI, taxes on extr action of petroleum, and income tax from petroleum extraction 
activities, while adjusting the non-oil budget accounts for the effect s of changes in the business cycle.  The denominator, unl ike 
in the rest of the table, is Mainland GDP. 
f From 2004 onwards, as foreign debt has been kept at zero, Ce ntral Government's total debt was all denominated in Nkr. 
Source : WTO Secretariat, based on data from Statistics Norway. Norway WT/TPR/S/205
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16. The Government's 2001 guidelines for economic policy asserts that fiscal policy shall be 
geared towards a gradual and sustainable increase in the use of  petroleum revenues.  As at December 
2007, the GPF's capital was equivalent to 88% of GDP.  Over time, the structural non-oil budget deficit should correspond to the expected real return of the GPF (the fiscal rule), estimated at 4%.  
The guidelines also call for this rule not to be  used mechanically, and for fiscal policy to place 
considerable emphasis on stabilizing business cycle fluctuations.
16 
17. During 2004-07, total fiscal revenue as a sh are of GDP increased slightly, while total 
expenditure decreased.  Petroleum-related revenu es increased from 12.8% of GDP in 2004 to 16.7% 
in 2006 as a result of high petroleum prices, before  falling to 13.8% in 2007;  they grew in nominal 
value terms throughout the whole period and represen ted about a quarter of total revenue in 2007.  
The current Government aims to keep the tax le vel constant at the level registered in 2004. 
18. According to the Government, the non-oil budget de ficit has been equal to or below the fiscal 
rule since 2006.  In its revised national budget for 2008, the Government proposed a non-oil budget deficit approximately 10% lower than th e expected real return of the GPF.
17  Nevertheless, both the 
IMF and the OECD believe that Norway's fiscal  stance has been somewhat expansionary and 
excessively pro-cyclical.18  The IMF argues that without reforms to curb pension or non-pension 
spending, the fiscal rule cannot be maintained in the long run.  One possible response would be to 
shift to a fiscal rule that is mo re restrictive;  however, given the success of the current guidelines, 
neither the authorities or the IMF argued for such a change.19 
19. Central government total debt as a percentage  of GDP is low relative to other OECD 
countries.  Furthermore, the Norwegian Government 's net asset position is positive, i.e. total assets 
exceed total debt.20   
20. In 2007, the Storting agreed on a reform of th e pension system, which will take effect from 
2010 onwards.  The objectives are to guarantee the sust ainability of the system and reduce the future 
budgetary impact of the ageing population.  It establishes, inter alia :  moderation of benefits, by 
basing them on lifetime earnings instead of the best 20 years;  and incentives for workers to remain in 
the labour market longer, by setting the replacement  rate of individual benefits dependent on 
retirement age, as well as allowing pensioners to  work after retirement without losing pension 
benefits.  The authorities estimate that the reform  will reduce pension expenditure by some 3% of 
GDP by 2050.21  
(5) BALANCE OF PAYMENTS  
21. As in the previous review period (2000-03), th e current account of the balance of payments 
reached sizeable surpluses during 2004-07, mostly du e to large positive balances in merchandise trade 
(Table I.5).  Higher international commodity pri ces in tandem with lower prices of imported goods 
(mostly manufactures) have led to a significant improveme nt of the terms of trade.  In particular, the 
                                                      
16 Ministry of Finance online information.  Viewed at:  http://www.regjeringen.no/en/dep/fin/Selected-
topics/Economic-Policy/Economic-Policy.html?id=418083. 
17 Ministry of Finance online information.  View ed at:  http://www.regjeringen.no/en/dep/fin/Press-
Center/Press-releases/2008/revised-national-budget-2008-sound-fisca.html?id=511405. 
18 OECD (2007c) and IMF (2007a).   
19 IMF (2007a) and IMF (2007b).  
20 Norges Bank online information.  Viewed at:  http://www.norges-bank.no/. 
21 IMF (2007a).  WT/TPR/S/205 Trade Policy Review 
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nominal price of both crude petroleum and natural gas more than doubled between the beginning of 
2004 and end of 2007.22   
22. The surplus in the services balance, although smal ler, also contributed to the current account 
surplus, growing approximately 170% over the same  period.  Since 2005, the current account surplus 
has stabilized at around 16.5% of GDP. 
Table I.5  
Balance of payments, 2004-08  
(US$ million) 
 2004 2005 2006 2007 2008a 
I. Current account 32,894 49,121 58,174 63,505 21,345 
A. Trade balance 35,013 49,696 61,289 64,375 22,806 
    Balance of merchandise trade 32,421 46,735 56,637 57,440 20,008 
    Balance of trade in services 2,592 2,961 4,652 6,935 2,799 
    Exports 108,749 134,732 156,667 181,351 55,396 
    Goods (f.o.b.) 82,646 103,710 122,112 138,783 43,089 
    Crude oil and natural gas 50,061 66,396 77,650 84,975 .. 
    Other goods 32,585 37,314 44,462 53,808 .. 
    Services 26,103 31,022 32,554 42,568 12,306 
    Imports 73,737 85,036 95,378 116,977 32,589 
    Goods (f.o.b.) 50,225 56,975 65,476 81,343 23,082 
    Ships 861 1,128 1,856 2,355 .. 
    Other goods 49,364 55,847 63,619 78,989 .. 
         Services 23,512 28,061 29,902 35,633 9,508 
B. Balance of income and current transfers -2,118 -575 -3,115 -870 -1,461 
    Net income 3,159 2,003 2,720 4,394 .. 
    Interest recei ved 11,755 10,140 18,230 24,133 .. 
        Interest paid 8,596 8,137 15,510 19,739 .. 
    Net current transfers -5,277 -2,579 -5,834 -5,264 .. 
II. Capital and financial account -27,880 -43,417 -44,522 -43,738 -10,081 
A. Capital account -153 -291 -143 -166 -61 
B. Financial account -27,727 -43,126 -44,379 -43,572 -10,020 
    Net direct investment -2,774 -16,547 -14,657 -10,568 -5,667 
    Net portfolio investment -28,442 -5,118 -74,625 -32,912 -23,043 
    Net other investments +8,952 -17,014 +50,270 +1,393 16,411 
    Changes in international reservesb -5,463 -4,447 -5,366 -1,484 2,278 
III. Errors and omissions -5 ,015 -5,703 -13, 652 -19,767 -11,264 
Memorandum item      
Current account/GDP (%) 12.7 16.3 17.3 16.3 .. 
Government Global Pension F und/GDP (%) 58.3 71.9 82.5 88.4 .. 
 
.. Not available 
 a 1st quarter figures. 
b A negative change corresponds to an increase in international reserves. 
 
Source : WTO Secretariat, based on information from Statistics Norway. 
23. Norway's large and persistent current account surpluses have not led to a strong appreciation 
of the country's currency, mainly because, by law, the entire capital of the GPF has to be invested 
abroad (Chapter IV(5)).  The related capital transf ers contribute to Norway's net lending towards the 
                                                      
22 OPEC online information.  Viewed at:  http://www.opec.org/home/basket.aspx. Norway WT/TPR/S/205
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rest of the world, reflected in the negative figures in the financial account of the balance of payments 
(Table I.5).  
(6) TRADE AND INVESTMENT FLOWS  
(i) Developments in merchandise trade 
24. Norway's total trade (imports plus exports) incr eased at a nominal average annual rate of 19% 
over 2004-07;  and as a proportion of GDP, from 50 .6% to 56.4%.  Exports represented on average 
64% of total trade.  The trade surplus was so me US$59 billion in 2007 (up from US$34 billion in 
2004). 
25. Norway has historically been a large exporte r of commodities such as petroleum and natural 
gas, and processed mineral products like alumin ium.  In 2007, exports of primary products 
represented 78.6% of the total value of exports, wh ich is one of the highest proportions among EEA 
countries.  Export growth has mainly resulted from increases in world prices of petroleum and natural 
gas products (see section (5) above).  Crude petr oleum and natural gas remained Norway's most 
important export products;  together they accounted  for 57.7% of exports in 2007, compared with 
58.1% in 2004 (Table AI.1).  Norway's exports of other commodities also grew in value, but 
maintained a constant share of around 20% of tota l exports during the period.  Agricultural products 
accounted for 5.4% of exports in 2007;  within the food sector, fish products are the main exports with 
4.2% of total exports. 
26. Exports of manufactures grew in nominal valu e terms by some 55% in the period 2004-07, 
while their share in total exports slightly declined  to 17.6% in 2007.  The main manufacturing exports 
are machinery and transport equipment, followed by chemicals. 
27. The composition of imports also remained mainly unchanged (Table AI.2).  Close to 77% of 
Norway's imports were manufactured goods in 2007,  a small decline with respect to 2004.  Amongst 
manufactures, machinery and transport equipment is the main sector;  non-electrical machinery, automotive products and office machines are the top categories.  Mining imports are the second most 
important imports, representing 14% (a 22% increase over 2004). 
28. The direction of Norway's merchandise trade did not change significantly during 2004-07.  
Norway's main trading partners are still the EC25 members, which accounted for 81% of exports and 
68% of imports in 2007.  The United Kingdom was th e main export market for Norwegian products 
with 26% of total exports, followed by Germany and the Netherlands (Table AI.3).  Norwegian 
exports to both the Americas and Asia grew in valu e terms, however the share in total exports of the 
former declined to 10% in 2007, while the share of the latter grew to 5.3%. 
29. The EC25 lost market share of imports during the review period, while the Americas' share, in 
particular Canada's, increased.  Asian products as a w hole, particularly Japane se, lost market share, 
though China's position increased to 6% in 2007, ma king it the fifth individual provider of Norway, 
after Sweden, Germany, the United Kingdom and Denmark (Table AI.4).  
(ii) Developments in trade in services 
30. During the period under review, Norwegian service exports grew faster than service imports 
(Table I.6).  In particular, shipping services sector doubled its contribution to the balance of trade in 
services, which reflects the growing Norwegian- owned fleet sailing unde r both Norwegian and 
foreign flags (Chapter IV(7)(iv)).  After shippi ng services, financial and business services were 
Norway's second most important service export in 2007 , representing almost a quarter of the total.  WT/TPR/S/205 Trade Policy Review 
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Tourism services were the most important category of service imports, representing some 40% of the 
total in 2007.   
Table I.6  
Trade in services, 2004-08  
(US$ million) 
 2004 2005 2006 2007 2008a 
Balance of trade in services 2,592 2,961 4,652 6,935 2,799 
Services exports 26,103 31,022 34,554 42,568 12,306 
    Shipping (gross recei pts) 11,253 13,189 12,873 15,467 4,524 
    Financial and business services 5,346 6,332 8,627 10,251 2,778 
    Tourism services 3,137 3,494 3,757 4,378 976 
    Oil drilling and other petrol eum activities 1,485 1,994 2,522 3,603 1,754 
    Transport and communication 1,847 2,107 2,198 2,811 958 
    Other services 1,454 2,052 2,551 4,181 1,317 
Services imports 23,512 28,061 29,902 35,633 9,508 
    Tourism services 8,820 10,455 12,145 14,690 3,699 
    Shipping (operating costs, ex cluding bunkers) 6,402 6,824 6,147 7,116 1,954 
    Financial and business services 4,459 6,032 6,252 7,009 2,004 
    Oil drilling and other petr oleum activities 1, 070 1,426 1,955 2,587 689 
    Transport and communication 768 856 871 1,081 339 
    Other services 1,993 2,469 2,534 3,151 823 
Memorandum item       
    Net freight income (shipping) 3,611 5,017 5,688 7,553 2,570 
 
a 1st quarter figures. 
 
Source : WTO Secretariat, based on info rmation from Statistics Norway.  Viewed at http://www.ssb.no. 
(iii) Foreign direct investment 
31. The stock of foreign direct investment (FD I) in Norway increased by around 23% between 
2004 and 2006 (latest year available), to NKr 79 billion (approximately US$13 billion).  This was 
driven by large increases in the stock of in ward FDI in petroleum and gas exploration and 
manufacturing industries, which accounted for approxi mately 55% of the total FDI stock in Norway 
in 2006.  Sweden, the United States and Denmark remain the main sources of FDI capital, accounting 
for nearly half of total FDI stock in 2006.23 
32. Outward investment by Norweg ian companies has also been dynamic.  Between 2004 and 
2006 (latest year available), the stock of out ward FDI grew by 38%, to NKr 764 billion (some 
US$130 billion).  Europe was the main destination, accounting for 70% of total outward flow of FDI 
in 2006;  in particular, to Sweden, Belgium, and Luxembourg, and the Netherlands.  Outside Europe, 
the main destinations were Brazil and Singapore.   Manufacturing and mining for investment have 
traditionally been the most important industries, but  their share of total stock decreased from 42% in 
2004 to 31% in 2006.  Norwegian investments in oil and gas extraction increased, and accounted for 
30% in 2006 up from 27% in 2004.24 
(7) OUTLOOK  
33. The Norges Bank expects real GDP growth in ma inland Norway to slow to about 3.25% in 
2008 as the economy reaches full capacity;  it is expect ed to soften further in 2009 before gradually 
picking up again in 2010 and 2011.  Higher than projected employment and wage growth will 
                                                      
23 Statistics Norway online information.  Viewed at:  http://www.ssb.no. 
24 Statistics Norway online information.  Viewed at:  http://www.ssb.no. Norway WT/TPR/S/205
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contribute to stronger growth in household real di sposable income until some time in 2009.  However, 
growth in private consumption should be curbed by higher saving and greater uncertainty surrounding 
developments in the housing market.  Overall, mainland demand is expected to slow in 2008-09, 
causing a decline in import growth to some 2.3% in 2009.  Unemployment is expected to increase 
throughout 2008-11, to reach some 3.75% in 2011 , reflecting the slow down in economic growth. 
34. Pressure from labour and energy markets are exp ected to push inflation rates up in 2008, with 
CPI reaching 4%.  However, the tightening of m onetary conditions already applied by Norges Bank 
are expected to bring inflation closer in line with the 2.5% target in 2009-11.  The key policy rate is 
expected to remain at 6% during 2 008-09, and to fall slightly in 2010-11.25  The Storting approved the 
Government's proposal of a non-oil fiscal deficit of 90 % of the GPF's return in 2008;  the Ministry of 
Finance expects the non-oil fiscal deficit to be kept close to the GPF's expected return in 2009-10. 
                                                      
25 Norges Bank (2008b).