Norway WT/TPR/S/70 
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I. ECONOMIC ENVIRONMENT 
(1) INTRODUCTION  
1. During the past decade, Norway has shown a strong economic performance with rapid 
growth, a sharp fall in unemployment and low infl ation.  This has been achieved through prudent 
management of petroleum and gas revenues, st ructural reform in various sectors, sound 
macroeconomic policies, and a policy of wage settle ment moderation.  Growth  has gone hand-in-hand 
with trade liberalization, encouraged in great pa rt by Norway's EEA memb ership and commitments 
under the WTO (Chapter II).  However, growth has sl owed somewhat since mid 1998;  growth in the 
mainland economy (i.e. excluding shipping, and oil a nd gas activities) is expected to remain subdued 
in 2000.  A major challenge is thus to return to solid, non-inflationary growth. 
2. Economic policy has been based on the close in teraction of fiscal, monetary and incomes 
policies.  Fiscal policy has been aimed at st abilizing growth in the demand for goods and 
services, while monetary policy has generally fo cused on the nominal stability of the Norwegian 
krone vis-à-vis the euro, recognizing that low and st able inflation is a precondition for exchange rate 
stability.  Trade policy has generally been used to promote a more efficient allocation of resources, 
and not to attain any specific macroeconomic goal.  A policy of cooperation between social partners, 
through the Solidarity Alternative, has sought the support of labour unions in moderating wage 
settlements in return for a strong commitment from th e authorities to orient monetary policy towards 
exchange rate stability and the conduct of a prudent fiscal policy.  This approach has contributed to 
curbing inflation, while seeking an upward trend in real wages;  however, a tight labour market has 
placed this strategy under considerable pressure since 1998.   
3. Against a generally positive economic scenario, so me points of concern emerge.  First, the 
centralized determination of wages may be creating di stortions in the allocation of resources.  Second, 
by targeting both inflation and the exchange rate monetary, policy may be overburdened. Third, fiscal 
policy, while anti-cyclical, might not have gone fa r enough in this direction.  Finally, productivity 
seems to be growing relatively slowly, which may suggest the need for a more competitive 
environment, including through further opening of th e trade and investment regime.  While none of 
these concerns pose a threat in the short term , addressing them may result in enhanced policy 
effectiveness in the medium run. 
4. An important element of Norway's economic ma nagement is the strategy of investing oil 
revenues abroad.  Since 1996, the Government has tr ansferred oil-related fiscal surpluses (averaging 
5% of GDP annually) to the State Petroleum Fund (SPF), which invests solely in foreign bonds and 
other securities.  The SPF plays an important role in moderating the real appreciation of the krone, 
thus preventing the emergence of a severe "Dutch disease" situation.1  
(2) RECENT ECONOMIC DEVELOPMENTS  
(i) Structure of the economy 
5. Due to the volatility of the petroleum sector, caused  mainly by sharp price variations in recent 
years, the relative share of the different economic sectors on GDP has fluctuated since 1996.  Despite 
these fluctuations, certain major secular changes can  be identified, which show a shift away from 
                                                      
1 The Dutch disease is the crowding out of the non-reso urce tradeable sector as a result of increases of 
income and wealth stemming, in the cas e of Norway, from oil exports.  This  is accompanied by a real exchange 
rate appreciation, caused by the shift of demand to non-tr adeable goods, which alters the relative price of these 
goods vis-à-vis tradeable goods. WT/TPR/S/70 Trade Policy Review 
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more traditional sectors, such as agriculture, and manufacturing in general, and towards new or less 
traditional activities (Table I.1).  Government involvement in the economy is high;  the State is estimated to control some 50% of assets of the main enterprises.  Such involvement is falling, 
however, as a result of a process of privatization, intensified in recent years notably in the banking 
sector (Chapter IV(5)). 
Table 1.1 
Gross domestic product, by sector, 1995-99 
(Annual percentage change in volume)  
 1995 1996  1997 1998 1999 
Agriculture and hunting  4.8 1.3 -4.3 3.8 3.1 
Forestry and logging  10.6 -12.0 0.9 -3.9 0.8 
Fishing and fish farming  14.6 -2.4 3.1 -1.9 -2.9 
Oil and gas extraction  9.1 11.7 4.2 -7.0 0.4 
Mining and quarrying  4.1 3.2 2.9 -0.8 -2.0 
Manufacturing  2.1 1.1 2.8 2.8 -3.5 
    Refined petroleum products  -48.1 137.5 2.8 -3.9 -3.4 
    Building of ships, oil platforms and modules  5.9 -5.7 1.2 8.5 -5.7 
Electricity, gas and steam supply  9.4 -9.5 6.6 4.8 4.4 
Construction  3.7 0.6 9.2 3.4 -2.8 
Wholesale and retail trade  2.0 9.5 5.1 5.2 -0.1 
Transport via pipelines  16.2 21.6 -1.2 -1.4 5.9 
Water transport  4.9 -1.0 2.9 3.4 -1.9 
Other transport activities  9.0 5.7 6. 9 1.4 3.0 
Post and telecommunications  -1.2 8.7 5.4 7.7 12.3 
Government services  0.7 2.5 2.2 2.5 2.4 
Gross domestic product  3.8 4.9 4.3 2.1 0.8 
Source: Information provided by the Norwegian authorities. 
(ii) Economic growth and employment 
6. Economic growth was strong between 1993 and mid 1998, but declined substantially in 1999 
(Table I.2).  This reflected the tightening of monetary policy and the substantial decline in 
investment, mainly in the petroleum sector, but also in the mainland economy.  The slowdown in 
mainland economic growth was expected to continue  in 2000, with growth below the "potential" 
(long-run non-inflationary) rate of about 2.25% (section (5)). 
7. Private consumption was a major force behi nd economic growth between 1995 and 1999.  In 
the latter year, consumption grew, however, less than  disposable income:  household real disposable 
income increased by about 2.9% in 1999 compared w ith consumer expenditure growth of 2.1%, thus 
the household saving ratio increased to some 7.5% of  disposable income.  Household net financial 
assets accounted for 54% of disposable income in  1999 compared with 30%  in 1993.  Public 
consumption expanded in general less rapidly than GDP in the 1995-97 period, but exceeded GDP 
growth in 1998 and 1999. 
8. The growth in employment, which began in 1993, came to a halt in 1998 marking an increase 
of 13% in total employment over the seven years to  1999, and leading to an employment rate of 78% 
of the population aged from 16 to 67 years, the highest in the OECD.  Mirroring the decline in the 
sector's activity, employment in manufacturing has b een contracting slightly in recent years, while 
employment in service activities has been increasing.  Demand for labour is expected to slow down in 
2000, since most of the anticipated growth is likel y to be labour saving, but less than originally 
expected.  In light of the overall demand picture,  the labour market is expected to remain tight. Norway WT/TPR/S/70 
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Table I.2  
Basic macroeconomic indicators, 1995-2000  
(Year to year percentage cha nge, unless otherwise specified) 
 1995 1996 1997 1998 1999 2000a 
Gross domestic product (real)      
Gross domestic product  3.8 4.9 4.3 2.1 0.8 2.7 
Petroleum activities and ocean tran sport  9.3 11.0 3.7 -3.2 0.5 .. 
Mainland Norway (market prices) 2.9 3.8 4.4 3.3 0.8 1.3 
Private consumption 3.4 5.3 3.7 3.1 2.1 2.7 
Public consumption 0.3 2.8 2.8 3.7 2.5 2.0 
Gross fixed capital formation (total) 3.4 9.9 15.1 8.1 -7.0 -5.8 
   Gross fixed capital formation (mainland) 12.3 11.3 12.8 2.4 -3.5 -0.6 
   Gross fixed capital formation (petroleum  activities) -13.7 2.6 15.6 25.7 - 14.0 -21.6 
Final demand from mainland Norway 4.1 5.8 5.2 3.1 1.1 1.9 
Exports of goods and services 4.3 9.3 5.7 0.5 0.6 6.2 
   Traditional goods 4.5 10.0 8.0 3.4 2.6 5.0 
   Crude oil 9.2 13.7 2.1 -3.8 -0.3 10.1 
   Ships and oil platforms -0.1 -16.8 11.5 5.0 -2.7 .. 
   Services -1.3 5.8 7.2 2.1 -0.9 .. 
Imports of goods and services 5.6 8.0 12.0 9.1 -3.6 0.8 
   Traditional goods 8.8 9.8 8.1 9.6 -2.4 2.2
   Crude oil 31.7 -10.4 17.0 23.3 13.7 ..
   Ships and oil platforms 7.1 27.2 37.2 17.0 -34.0 ..
   Services -2.0 0.6 17.0 6.0 1.5 ..
Household savings rate (% persona l income) 5.8 4.7 5.1 6.8 7.5 6.9 
Employment, wages and prices       
Unemployment (% labour force) 5.4 4.8 4.1 3.2 3.2 3.6 
Labour productivity 1.6 2.4 1.4 -0.2 0.5 .. 
Wage index 3.3 4.4 4.7 6.5 5.1 3.7 
Wages deflated by CPI 2.2 3.2 1.0 3.2 2.7 1.3 
Consumer price index 2.4 1.3 2.4 2.3 2.3 2.4 
External sector       
Current account balance (% GDP) 3.3 6.5 5.2 -1.5 3.7 10.1 
International reserves (US$ billion) 22.7 26.4 24.2 18.8 19.5 .. 
State Petroleum Fund (US$) n.a. 7.4 16.0 22.2 26.1 36.8. 
Net foreign assets (% of GDP) 0.2 3.7 7.2 8.6 10.2 17.2 
General government finance       
General government balance (% of GDP) 3.5 6.5 7.3 3.9 4.8 7.4 
Central government balance befo re transfers to the State 
Petroleum Fund (% GDP)  0.4 0.5 0.7 0.3 0.3 0.7 
Net transfers to the State Petroleum Fund (% GDP)b 0.2 0.5 0.6 0.3 0.3 0.7 
Central government gross debt (%  GDP) 35.4 31.6 25.4 22.9 21.9 .. 
Money and interest rates       
Money supply, M1  (yearly average.) 1.9 4.0 9.6 9.0 14.0 .. 
Broad money, M2 (yearly average) 5.9 4.6 3.8 6.6 6.4 .. 
3 month  money market (NIBOR) interest ra te (% per annum) 5.4 4.9 3.6 5.7 6.4 5.7 
Overnight lending rate (% per annum) 5.9 6.5 5.41 7.5 8.4 8.0 
Exchange rate        
Nominal exchange rate (NKr per US$) 6.34 6.46 7.07 7.54 7.80 8.00 
.. Not available. 
n.a. Not applicable. 
a Projection. 
b Revenues from petroleum activities minus tran sfers to finance the non-oil budget deficit. 
Source :  Information provided by the Norwegian authorities. 
9. After growing rapidly in the period 1993-98, i nvestment contracted substantially in 1999, 
mainly as a consequence of developments in the petroleum sector.  Following the strong performance 
of the 1996-98 period, investment projects were pos tponed in 1999 due to a lack of capacity in 
supplier industries and lower oil prices.  Investme nt was forecasted to decline even more sharply 
in 2000, although this may need to be reassessed in the light of higher oil prices.2  Mainland business 
                                                      
2 Statistics Norway, (2000b), p. 22. WT/TPR/S/70 Trade Policy Review 
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investment also declined in 1999, reflecting the completion of some la rge infrastructure projects, such 
as the Gardermoen airport and the National Hospita l, a strong decline in manufacturing investment, 
and reduced corporate profitability. 
10. Following growth at rates of over 5% in 1996 and 1997, exports of goods and services 
expanded less rapidly in 1998 and 19 99, influenced by the decline in shipbuilding and oil-related 
services.  Imports of goods and services expanded very rapidly between 1995 and 1998, before 
declining in 1999.  In 1998, for the first time in the 1990s, the current account showed a deficit, due to 
the sharp fall of the trade surplus, which in turn resulted from the comb ined effect of strong domestic 
demand and the decline in oil prices.  In 1999, as a result of an increase in oil prices and a decline in 
imports triggered by a contraction of investment, particularly in the oil sector, the current account 
posted a surplus.  
(iii) Prices and wages 
11. Despite a rapid rise in wage costs, consumer price inflation has remained moderate during the 
last few years (Table I.2).  In 1999, the consumer  price index increased by 2.3% as the increase in 
prices of petrol, electricity and food were partially  offset by a decrease in telecommunication rates 
and prices of clothing and footwear. 
12. By keeping the nominal exchange rate stable , responsibility for cost competitiveness and the 
determination of the real exchange rate has been falling mainly on incomes policy, in particular on 
wage settlements.  A sharp fall in unemploy ment since 1993 and a gradually increasing labour 
shortage in many sectors have resulted in high  wage growth and placed incomes policy under 
considerable pressure.  In 1998, nominal wage growth  in Norway was, at 6.2%, about twice the rate 
recorded by its trading partners;  in 1999, wages in creased by around 2.7% in real terms.  To revive 
consensus on the use of wage policy to contai n inflation and enhance cooperation between the 
Government and the social partners in the ar ea of incomes policy, th e Arntsen Committee was 
appointed in 1999.  The Committee agreed that wage growth in 1999 should not exceed 4.5%, and 
that as of 2000 it should be no higher than the level prevailing among Norway's trading partners.  The 
authorities noted that the results of the 1999 wage se ttlement were to a large extent in keeping with 
the recommendations presented by the Arntsen Committee.  
13. Some progress has been made with respect to labour market flexibility in recent years.  
Labour flexibility has been enhanced by the introduc tion of legislation promoting the hiring out of 
labour.  The participation rate has increased by more than 4% since 1992, mainly reflecting the 
increased active participation of women. 
(iv) Monetary and exchange rate policy 
14. Pursuant to the Norges Bank Act and the Exch ange Rate Regulation, adopted by Royal 
Decree of 6 May 1994, the Central Bank (Norges Bank) has responsibility for monetary, credit and 
exchange rate policy.  In accordan ce with the Exchange Rate Regulation, monetary policy is aimed at 
maintaining a stable exchange rate against other Eu ropean currencies, interpreted to mean the euro 
from 1 January 1999.  Policy instruments must be or iented to return the exchange rate to its initial 
range over time in the event of significant changes in the exchange rate (i.e. changes that fuel 
expectations of cost and price inflation to the exte nt that the movement in the exchange rate becomes 
self-reinforcing).  However, the Central Bank is no t obliged to intervene in  the foreign exchange 
market to support the currency. 
15. In its aim to maintain exchange rate stability , the Central Bank is allowed considerable 
short-term management flexibility;  the Exchange Rate Regulation takes into account that the krone Norway WT/TPR/S/70 
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may remain temporarily outside its normal range.  Th e authorities have noted that, in exercising this 
flexibility, the Central Bank focuses on the fundame ntal preconditions to achieve exchange rate 
stability such as cost and price inflation convergence with the European Central Bank's inflation goal.  
In this respect, and in accordance with the Central Bank's official interpretation of the guidelines set 
for it in the Royal Decree of 6 May 1994, two fundame ntal conditions must be fulfilled in maintaining 
long-term exchange rate stability:  (i) price and cost inflation must not exceed over time the corresponding inflation in the euro area and (ii) mone tary policy must not gene rate deflation through a 
recession.  The authorities noted that the Cent ral Bank makes public all factors taken into 
consideration for any monetary policy decision to  avoid risk and unnecessary speculation.  Although 
keeping the exchange rate stable remains its ma jor goal, in accordance with the Exchange Rate 
Regulation, the Central Bank has recently moved away  in practice from using the exchange rate as a 
short-term operational target, and has to a la rger extent focused on the basic conditions for 
maintaining a stable exchange rate ove r time, including targetting inflation. 
16. After a period of relative stability between  1992 and 1996 following the abandonment of 
the fixed exchange rate system, exchange rate vari ability increased significantly.  This may be partly 
because, since January 1997, the krone has floa ted without interventions in the foreign 
exchange market, but also because of large fluctu ations in oil prices and increased uncertainty in 
international financial markets.  After depr eciating in 1997 and 1998, the Norwegian krona 
appreciated markedly through 1999, as measured agains t the euro;  relatively high interest rates and 
the recovery of petroleum prices, helped to maintain  the krone/euro exchange rate within a range of 
about NKr 8.25-8.40 per euro during 1999. 
17. The Central Bank conducts monetary policy th rough open market operations and by setting 
interest rates on bank's loans and deposits in th e Central Bank, thus influencing the level of 
commercial interest rates in Norway.  Interest rates were lowered five times during 1999, by a total of 
2.5 percentage points but neverthel ess remain above those of the euro  area:  the Central Bank deposit 
rate stood at 5.5% at the end of 1999, and the overni ght loans rate at 7.5%.  As a consequence of the 
Central Bank's key rates cuts, short- term market rates have declined;  the three-month interbank rate 
fell from 8% at the beginning of 1999 to 6 % in November 1999, while the ten-year government bond 
rate moved up by 1 percentage point to 6%. 
18. The increase in broad money supply, M2, accelerated in the last months of 1999 as a result of 
increased private sector net sales of foreign currency and central government budget transactions.  
This acceleration was partly offset by weaker cr edit growth by banks;  domestic credit growth 
continued to decelerate in 1999, to 8% co mpared with 8.3% at the end of 1998. 
(v) Fiscal policy 
19. Fiscal policy plays an important stabilization role  in the Norwegian policy framework:  a tight 
fiscal stance is adopted in periods when there is a positive and widening gap with respect to potential 
output.  The main objective for the authorities is to limit the influence of oil revenues in the fiscal 
stance, thus fiscal policy is used to smooth the ec onomic cycle and try to prevent the emergence of 
situations such as the "Dutch disease", as well as  unsustainable expenditures pressures.  Since 1987, 
the authorities have used the non-oil cyclically adjusted budget balance at the central government 
level (net of interest payments) as the main indicator of the fiscal policy. 
20. Norway maintains a dual income tax system, by wh ich capital income is taxed at a lower, flat 
rate and income from labour is taxed at a higher and progressive rate.  To achieve this, all income of 
individuals net of deductions is first taxed jointly at the corporate income tax rate.
3  Personal income 
                                                      
3 OECD, (1999a). WT/TPR/S/70 Trade Policy Review 
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from labour, which is not eligible for deductions, is th en subject to a surtax of 13.5%, or 19.5% above 
certain thresholds. 
21. The general government policy approach has occasionally run counter to that of the central 
Government.  In 1998, for example, the fiscal  stance at the central government level had a 
contractionary effect of 0.25% of GDP, while at th e general government level it had an expansionary 
effect of 0.5% of GDP per annum.  About half of local authorities' revenues come from cyclically 
sensitive taxes and the other half are transfers from the central budget.  In 1998, the authorities decided to shift corporate tax revenues from the local to central government. 
22. As the main income stabilizer in Norway, fiscal  policy has significant trade effects, and in 
some cases, responds to developments in trade-rela ted areas.  The effect on imports is both indirect, 
through the effect of policy actions on income a nd on the real allocation of resources between the 
sheltered and exposed sectors, and direct, through adju stments of the various indirect taxes.  Despite 
the high income from petroleum activities, mainla nd GDP is heavily taxed. According to OECD 
calculations, taxes accounted for 48% of the main land's GDP in 1998, while revenue from the oil 
sector (tax and non-tax) was around 8% of total GDP. 
23. Surpluses from oil activities are now deposited in the State Petroleum Fund (SPF), once the 
deficit (if any) in the non-oil sector has been covere d (Box I.1).  Transfers to the SPF started in 1996, 
and are expected to rise substantially in 2000.  The share of oil revenues saved through the SPF also 
helps Norway to weather fluctuations in the oil sector .  Mainly as a result of this policy, Norway's net 
external assets have increased from 3.7% of GDP in 1996 to an estimated 17.2% of GDP in 2000.  In 
the last decade, Norway has gone from being a net de btor, until 1994, to being an increasingly larger 
net creditor. 
24. In 1998, a fiscal slippage exerted downward pressure on the Norwegian krone and led to a 
certain overheating of the product and labour markets,  where tight conditions prevailed.  To tackle 
this situation, Parliament adopted a fiscal policy ti ghtening in 1999, which, together with rising oil 
prices, supported an appreciation of the krone a nd helped counter inflationary pressures in the 
economy.  The general government bud get surplus is estimated to have  increased by 0.9% to 4.8% of 
GDP in 1999.  For 2000, the Government aims to set a neutral fiscal stance in the state budget, which 
would allow for real growth in underlying expenditures of about 2.5% offset by an increase in indirect 
taxes and only partial indexation of income tax brackets.  
25. Although public finances are sound in the short run, they face challenges posed by escalating 
pension liabilities in the long term.  Pension expenditure expanded in 1998-99 as a result mainly of a 
significant increase in basic pension benefits, and an increase in the number of recipients, as the 
eligibility age was lowered from 64 to 62 years in 1 997.  Considering, moreover, that about 60% of 
the work force may benefit from an early retiremen t scheme, pension expenditures are expected to 
increase substantially in the future.  In this context, the SPF is expected to play an important role in 
the future in securing the funding needed to pay fo r rapidly rising social security expenditures, in 
particular pensions.   
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Box I.1:  The State Petroleum Fund 
The Parliament adopted the Act relating to the State Petroleum Fund in 1990.  The Ministry of Finance is 
responsible for the management of the Fund but has de legated the task of the operational management of the 
Fund to the Central Bank. 
The Fund has two main functions:  (i) a buffer for government finances in that the government budget surplus is transferred to the Fund, whereas a deficit is  covered by drawing on the Fund and (ii) a tool for 
managing future financial requireme nts arising from increasing pensi on outlays accompanied by declining 
petroleum earnings. 
The surplus on central gov ernment accounts is saved in the Fund.  Th e first transfer to it, corresponding to 
the surplus in 1995, occurred on 31 May 1996.  Further capital has been transferred at the end of 1996, 1997, 
and over the course of the year since 1998.  Total transfers between 1995 and 1999 amounted to NKr 165.7 billion.  The capital of the Petroleum Fund has been invested in fixed income securities and, since 1998, also 
in equities. 
The entire capital of the Fund is invested abroad.  Th e market value of the Fund's foreign currency portfolio 
was NKr 222 billion at end 1999.  The National Budget for 2000 project ed the Fund to  reach NKr 294 
billion at end 2000, and NKr 665 billion at end 2003.  The Fund is already by far the largest securities 
portfolio managed in Norway, but remains a modest investor in capital markets relative to large international funds. 
Although the Fund is not a pension fund, future increases in pension payments are an important reason for 
the Government to seek a high savings rate.  In the National Budget for 2000 it was estimated that the present value of central government commitments in the form of accumulated pensions amounted to 
NKr 2,633 billion, or over ten times greater than the Fund's capital. 
Source:   The Petroleum Fund - Annual Report 1999, Norges Bank. 
(vi) The balance-of-payments 
26. Norway's balance of payments has usually post ed a current account surplus since 1988,  this 
was the case in both 1996 and 1997 (Table I.3).  In 1998, however, the combination of lower oil prices and strong imports, led mainly by continue d strong investment, resulted in a substantial 
contraction in the goods and services surplus and to a current account deficit equivalent to 1.5% of 
GDP, the first since 1988.  In 1999, a recovery in o il prices and a contraction in imports triggered by 
the decline in investment, led to the correction of the imbalance, and the current account posted a 
surplus of 3.7% of GDP.  The current account balance is estimated to be some 10% of GDP in 2000.  This is expected to be the result of higher oil export earnings combined with a cyclical rise in the 
value of traditional exports and low import growth. 
27. The service balance recorded a de ficit of 1% of GDP in 1999, compared with a surplus of 1% 
of GDP in 1996.  This deterioration of the balance of services during the period stems from a weaker travel balance, stronger imports of financial and business services, and an increase in direct purchases 
of services abroad by Norwegian residents.  Net investment income revenues remain negative, but 
less so than in 1996, due to an increase in inter est and dividend payments from abroad.  Net foreign 
assets have been increasing substantially in recent ye ars;  they amounted to NKr 104 billion or 9% of 
GDP in September 1999.  Due to the accumulation of revenue from the petroleum sector and its 
investment abroad through the SPF, they are exp ected to represent some 17.2% of GDP at the end 
of 2000. WT/TPR/S/70 Trade Policy Review 
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Table I.3 
Balance of payments, 1995-99 
(US$ million) 
 1995 1996 1997 1998 1999 
Balance of goods and services 8,796.8  13,536.1  10,904.2 329.2 8,805.3 
Exports, total 55,745.4  64,163.0  63,454.9 54,917.4 59,337.8 
of which: Goods 42,150.5  49,797.2  48,588.7 40,589.0 45,299.1 
 Services 13,595.0  14,365.8  14,866.2 14,328.4 14,038.7 
 Shipping 7,130.0 7,256.2 7,372.7 6,905.3 6,676.9 
 Petroleum services, drilling and pipe line transport 666.6 795.7 942.6 977. 1 1,265.5 
 Travel 2,361.8 2,394.4 2,216.0 2,220.3 2,229.1 
 Transport and communication 1,216.7 1,184.5 1,221.1 1,223.2 1,127.7 
 Financial and business services  1,670.3 2,179.3 2,473.7 2,427.3 2,230.8 
 Other services 549.4 555.7 640.2 575.2 508.7 
Imports, total 46,948.6 50,626.9 52,550.6 54,588.2 50,532.6 
of which:  Goods 34,211.2 37,496.4 37,703.0 39,257.3 35,144.0 
  Services 12,736.0 13,130.5 14,847.7 15,330.9 15,388.6 
 Shipping 2,981.2 3,233.4 3,688.5 3,540.6 3,568.6 
 Petroleum services, drilling and pipe line transport 726.5 717.6 933.2 843. 2 1,232.3 
 Travel 4,246.5 4,522.3 4,471.6 4,607.7 4,751.3 
 Transport and communication 542.1 540.4 479.9 578.1 492.3 
 Financial and business services  2,385.3 2,211.6 2,934.2 3,069.9 2,911.4 
 Other services 1,854.3 1,905.1 2,340.2 2,691.4 2,432.7 
Balance of primary incomes and current transf ers -3,930.6 -3,317.8 2, 966.9 -2,486.6 -3,227.9 
Primary income and current transfers from abroad 5,812.3  6,400.9  6,731.0 7,753.1 8,828.8 
 Compensation of employees 189.3 185.8 169.7 198.9 192.3 
 Reinvested earnings 631.4  950.3  765.2 734.0 730.6 
 Interest 3,447.9 3,578.5 4,073.3 5,054.0 6,107.7 
 Dividends 268.1 317.6 448.7 503.6 551.9 
 Current transfers to Norway 1,275.6  1,322.3  1,231.7 1,262.6 1,246.3 
Primary income and current transfers abroad 9,742.9  9,718.7  9,697.9 10,239.7 12,056.8 
 Compensation of employees 504.9 533.0 553.0 502.1 500.6 
 Reinvested earnings 804.6 453.7 510.0 587.5 1,030.6  
     Interest 3,830.4 3,549.2 3,989.1 4,487.8 6,350.3 
 Dividends 1,268.9 1,712.5 1,649.2 1,809.4 1,339.5  
 Transfers from general government 1,165.1 1,227.9 1,018.4 971.9 1,256.5 
 Other current transfers from Norway 2,083.0 1,716.6 1,616.1 1,713.8  1,614.6  
Current account balance 4,866.2 10,218.3 7,937.3 -2 ,157.4 5,577.3 
Net capital transfers -168.3 -126.9 -180.6 -100.0 -77.4 
Norwegian investment abroad, total 6,195.7 22,343.0 17,712.3 9,360.5 25,293.3 
 Direct investment abroad 2,854.1 5,890.7 5,018.4 2,547.2 5,483.6 
 Portfolio investment abroad 3,536.1 9,839.0 12,748.8 11,708.6 7,545.1 
 Other investment abroad -895.7 161.6 1,240.9 1,587.4 6,229.7 
Foreign investment in Norway 4,949.1 14,220.3 11,552.1 15,723.9 18,865.8 
 Direct investment in Norway 2,407.6 3,167.0 3,628.4 3,601.6 6,576.3 
 Portfolio investment in Norway 634.4 220.3 2,556.0 7,184.5 3,467.9 
 Other investment in Norway 1,907.1 10,833.0 5,367.6 4,937.8 8,821.5 
Undistributed capital transactions 3,418.9 1,968.6 1,606.4 4,106.0 -1,017.3 
Capital transaction (net lending) 4,697.9 10,487.2 7,849.6 -2,257.4 5,410.3 
Increase in Norway's net assets 5,954.4 9,174. 1 5,125.5 - 598.7 4,970.5 
Memorandum:  average exchange rate (NKr per US$) 6.34  6.46  7.07  7.54  7.80 
Source:  Norway Statistics, Central Bank. 
(3) DEVELOPMENTS IN TRADE  
28. Exports of services increased less than tho se of goods during the 1995-99 period, expanding 
at an annual average rate of 2.5%.  The growth of  tourism and its closely linked activities, such as 
transportation, has been particularly strong.  While exports of maritime transport services have 
declined during the period, pipeline transport an d other petroleum-related services exports have Norway WT/TPR/S/70 
 Page 9 
 
 
increased.  Exports of financial services rose significantly between 1995 and 1998, but declined 
in 1999. 
29. Imports of services expanded by an average of 4.4% per year during 1995-99.  The largest 
import items are travel, services supporting shipping,  and financial services;  however, imports of 
petroleum-related services gather ed importance during the period, expanding at an above-average 
rate. 
30. Norwegian non-oil external trade, most of wh ich takes place under preferential conditions, 
has expanded rapidly since the last Review in 1996.   Exports of non-oil traditional goods increased by 
32% between 1994 and 1999, equivalent  to an annual average growth rate of 5.7% (Table I.2)  
However, total exports of goods were affected by the bust and boom cycle in petroleum prices, and 
increased at a lower rate.  After a sharp decline in  1998, due to the slump in petroleum prices and a 
decline in competitiveness, total expo rt growth resumed in 1999, driven  by a recovery in oil prices.  
Traditional merchandise exports expanded by 2.6% in  1999, making a smaller contribution to growth 
in the mainland economy than in previous years.  The authorities noted that Norway may have lost 
market share in 1999, for the third consecutive year, following four years of market share gains.  
Exports are expected to expand by some 9.1% in 20 00, driven by a 16% increase in oil exports, while 
traditional exports are expected to grow by 4%.4  
31. Non-oil imports expanded faster than exports  over the 1994-99 period, increasing by 38%, or 
at an average annual rate of 6.7%.  Import growth in 1998 was particularly fast, triggered by strong 
demand for industrial supplies, investment, and cons umer goods;  imports declined, however, in 1999, 
and are expected to stagnate in 2000, reflecting weak growth in Norway's mainland economy.  The 
relative stability over the past years of the pr ice index of traditional merchandise imports has 
contributed to keeping price inflation under control. 
(i) Composition of trade 
32. Exports of oil and gas accounted for some 40% of  total exports in 1998 (Chart I.1);  total 
exports of mining products, including petroleum and gas,  accounted for more than half of total exports 
in the same year, this is less than in previous years,  due to the effect of lower oil prices during 1998.  
Exports of fish products have almost doubled  in value terms during the 1990s, mainly due to 
increased foreign demand for Norwegian salmon.  Exports of manufactures account for around one 
third of total exports;  the main items are in the machinery and transport equipment categories 
(Table AI.1). 
33. Some 83.3% of imports in 1998 were manufact ured goods, particularly durable consumer 
goods, office machines and telecommunications equi pment, automotive products and chemicals;  
agriculture accounts for some 8.6% of total imports, and the rest is accounted for by mining products.  
The composition of imports has remained largely unchanged in recent years, with the share of 
manufacturing and agricultural products increasing  slightly at the expense of mining products 
(Table AI.2). 
(ii) Direction of trade 
34. Norway's main trading partners are the memb er countries of the European Union, which 
accounted for 76.9% of exports and 67.7% of imports in 1998 (Chart I.2).  At the individual country 
level, the main markets for Norwegian exports are the United Kingdom, Germany and Sweden, which 
combined received some 40% of total Norwegian e xports in 1998.  The main individual suppliers of 
imports are also Sweden, Germany and the United Kingdom, representing almost 40% of total imports.  Norway's main trading partner outside th e EU is the United States (Tables AI.3 and AI.4). 
                                                     
 
4 Norges Bank (1999), p. 28. WT/TPR/S/70 Trade Policy Review 
Page 10 
 
 
Total: US$ 37,458.9 millionChart I.1 
Merchandise trade by product, 1993 and 1998
1993 1998
(a)    Ex ports (f.o.b. )
Natural gas
9.8%Aluminum alloys 
5.7%Other mining 
6.5%Non-war
ships and boats
2.7%Other 
manufactures a
18.7%
Total: US$ 31,890.6 million
(b)    Im ports (c.i.f.)
Agriculture
8.4%Mining
8.3%
Iron & steel
4.7%
Chemicals
10.6%
Automotive 
products
6.1%
Office machines & 
telecom eqpt.
7.6%Other 
consumer 
goods
12.2%
Textiles & 
clothing
7.0% Other semi-
manufactures
9.1%Other electrical 
machinery
5.3%Agriculture
8.6%Mining
7.0%
Iron & steel
4.4%
Chemicals
9.2%
Automotive 
products
9.1%
Office machines & 
telecom eqpt.
8.6%Other electrical machinery
5.1%Other semi-
manufactures
9.6%Other 
manufactures a
22.3%
Other 
consumer 
goods
10.9%
Textiles & 
clothing
5.4%
Total: US$ 24,002.7 million
a               Includes other not elsewhere specified category.
Source :   UNSD, Comtrade database (SITC Rev.1).Per cent
Other 
manufactures a
20.7%Total: US$ 40,383.2 millionFish, fresh, 
frozen, etc.
6.1%Other 
manufactures a
14.1%
Machinery and 
transport
13.0%
Crude 
petroleum
39.5%
Natural gas
7.2%Aluminum alloys 
4.4%
Other mining 
8.1%Non-war ships 
and boats
4.1%Other 
agriculture
3.6%Fish, fresh, 
frozen, etc.
8.1%Other 
agriculture
3.1%
Crude 
petroleum
29.9%Machinery and 
transport
15.5%
 Norway WT/TPR/S/70 
 Page 11 
 
 
Chart I.2 
Merchandise trade by partner, 1993 and 1998
1993 1998
(a)    Ex ports (f.o.b. )
Total:   US$ 31,890.6 million Total:   US$ 40,383.2 million
Total:   US$ 24,002.7 million Total:   US$ 37,458.9 million
               
Source:  UNSD Comtrade database (SITC Rev.1).Per cent
Americas
10.9%Others
1.8%
Other Europe
3.5%
European
Union
78.3%
Others
1.7%
 Americas
12.2%(b)    Im ports (c.i.f.)
Asia 
14.4%
European 
Union
67.2%Japan
4.5%Germany
12.3%UK
16.9%USA
6.3%
UK
9.2%USA
8.1%
UK
9.9%Asia 
6.5%Others
1.1%
Americas
11.2%
European
Union
76.9%Other Europe
4.3%UK
24..6%
Other Europe
4.5%Others
1.9%
Americas
12.3%Asia 
12.1%
European 
Union
67.7%Other Europe
6.0%Sweden
14.1%
Germany
13.6%USA
7.9%Sweden
14.7%
Germany
13.5%Germany
13.0%
Sweden
8.7%Asia
5.5%
USA
6.2%
Sweden
9.8%
Japan
8.0%
 WT/TPR/S/70 Trade Policy Review 
Page 12 
 
 
35. The trade shares of Norway's main trading partners have remained mainly unchanged 
since 1996, and are also very similar to pre-EEA trade shares.  The only noticeable change is a 
small decline in Asia's share in total exports a nd imports, to the benefit of trade with Eastern 
European countries.  The increase in  trade with countries in Eastern Europe may have been helped by 
the free-trade agreements signed by EFTA with various countries in the region. 
(4) TRENDS AND PATTERNS IN FOREIGN DIRECT INVESTMENT (FDI) 
36. In recent years, Norway has aimed to attract fore ign investment;  for this purpose, legislation 
has been reformed (Chapter II) and the liberaliza tion of capital movements (including foreign direct 
investments) required by the EEA Agreement h as been extended to other OECD members.  
37. Direct investment outflows achieved their p eak in 1996 (US$5.9 billion), and have since 
declined somewhat;  the decline was substan tial in 1998, but there was a recovery in 1999 
(Table IV.4).  The main destination for Norwegia n investment is the European Union, mainly the 
United Kingdom and Sweden.  Most of the investment outflows in the 1995-99 period were in the transport and communication sectors.  Direct inv estment inflows achieved their peak in 1999 
(US$6.7 billion).  The main investor in Norway is the European Union, mainly the United Kingdom. 
Most of the investment inflows are in th e oil extraction, mining and manufacturing. 
(5) OUTLOOK  
38. Economic activity in mainland Norway is expect ed to remain somewhat subdued in 2000 
compared with previous years due to the effect of still high interest rates on domestic demand;  although the developments in 1999 indicate that th e slowdown in the Norwegian economy came to an 
end last summer.  A number of indicators, with the exception of fixed investment in the petroleum 
sector, point to higher growth, and in the first quarter of 2000, the Norwegian economy was growing 
faster than in 1999.  The growth in mainland GDP is  expected to be about 0.5% in 2000.  Total GDP 
is expected to grow faster, at some 2.7%, partly as a reflection of higher production of petroleum.  All 
in all, Norwegian economic developments are e xpected to remain favourable.  The Norwegian 
economy is expected to benefit in 2000 from higher oil prices resulting in a substantial increase in the 
current account.  The sterilization of income from oil activities through the State Petroleum Fund and 
the moderate cooling off of the economy will contri bute to preventing an appreciation of the krone.  
Although currently economic fundamentals are sound, points of concern in the medium-term include 
rising labour costs and their potential effect on inflati on, which is higher than the  euro-area average, 
and on competitiveness.  The capacity for demand  management, incomes policy discipline and 
productivity growth in the period ahead appear to be key factors.  Norway WT/TPR/S/70 
 Page 13 
 
 
Table I.4 
Foreign direct investment by country, 1995-99 
(US$ million)  
 1995 1996 1997 1998 1999 
Net direct investment outflows 2,854.1 5,890. 7 5,018.4 2, 547.2 5,483.6 
Europe 1,905.4 4,409.0 2,357.1 838.5 .. 
European Union 1,950.0 4,385.0 2,142.0 682.4 .. 
 Sweden 978.4 1,248.1 885.3 457.8 .. 
 United Kingdom 568.8 2,774.0 323.6 422.0 .. 
 Denmark 29.8 -29.4 157.9 165.4 .. 
 Germany 6.0 23.4 66.1 -320.8 .. 
Other European countries -44.6 120.0 215.1 156.1 .. 
America 215.9 520.4 1,765.3 727.6 .. 
 United States 136.1 48.6 1,235.1 633.6 .. 
Asia, Africa, Oceania 231.1 -107.6 136.2 202.3 .. 
Net direct investment inflows 2,407.6 3,167. 0 3,628.4 3, 601.6 6,576.3 
Europe 1,491.8 170.6  3,139.6 3,930.6 .. 
European Union 923.5 1,000.6 3,084.7 3,690.6 .. 
 United Kingdom -695.1 -50.0 2,825.5 870.2 .. 
 Denmark 45.7 -31.3 78.5 496.4 .. 
 Sweden 682.3 370.6 36.5 309.9 .. 
 Germany 39.7 -52.0 28.0 70.0 .. 
Other European countries 536.8 -830.0 54.9 240.1 .. 
America 69.9 1,969.3 -293.2 -620.6 .. 
 United States 12.9 1,841.5 167.3 -324.1 .. 
Asia, Africa, Oceania  -60.9 27.4 -41.9 -86.3 .. 
.. Not available. 
Source:  Information provided by the Norwegian authorities.