unprofitable enterprises afloat. subsequently, the business sector experienced a long period of high productivity growth. moreover, shifting forces have driven the economy. in the wake of the crisis around 1990, labour costs decreased to a low level compared with norway ’ s trading partners and wage settlements were moderate. in 1995, the cost level was 10 to 12 per cent below norway ’ s average for the oil age from 1970 until now. in addition, real interest rates in norway fell markedly through the 1990s from high levels. this was because the fixed krone exchange rate regime maintained through the period managed to bring down inflation and inflation expectations. moreover, growth in public spending was rapidly reduced once business sector activity had recovered. economic shift over the past decade norway experienced an economic shift. the cost level began to rise. this was related to the sharp improvement in norway ’ s terms of trade at the time and a gradual pickup in growth abroad. prices for norwegian exports such as oil, gas, metals, minerals, fish and freight, rose markedly, while prices for imported goods fell. from 2003 to 2008, terms - of - trade gains alone pushed national income up by more than 20 per cent, or a good 4 per cent per year. institutions and mechanisms had also been put in place to manage the sharp increase in income. norway ’ s sovereign wealth fund, the government pension fund global, and the fiscal guidelines were established with the express purpose of making the mainland economy less susceptible to fluctuations in the oil price. improved terms of trade, higher revenues and increased government spending contributed to a stronger krone and a shift in real resources towards sheltered sectors. at the same time, the fiscal rule provided a basis for growth in business sectors other than the oil industry and the public sector through the decade. norway had a plentiful supply of labour from new eu member countries and experienced several years of high output growth. at the same time, the inflation target for monetary policy adopted in 2001 provided a sound anchor for inflation expectations. autumn 2008 in 2008, the expansionary period was drawing to a close. costs had risen sharply, credit growth had been strong, the key policy rate had been raised and house prices had started to fall. petroleum revenue spending over the central government budget had increased, but employment in traditional industries was still high. despite norway ’ s high cost level, merchandise exports and supplies of goods and services to the oil industry held up well due to strong demand. instead of a gradual slowdown, economic growth came

of countries globally. in 2008 it was decided to increase the share of emerging market assets in the fund ’ s benchmark portfolio. thus, investments in these markets have grown. the government has stated that the expected annual return on the fund will be close to 4 per cent over time. since its establishment, the average return has been 2. 7 per cent. it was only a little more than a year ago that we witnessed the steepest fall in global capital markets in our time. by maintaining the fund ’ s risk profile it is fairly probable that the average return will gradually approach 4 per cent again. last year was the best in the fund ’ s history. gains in international equity and fixed income markets led to a record annual return of 25. 6 per cent in 2009. 3 however, developments in government pension fund global – annual report 2009. 2009 must to a large extent be viewed in light of the financial crisis and are mainly due to a reversal of the negative results in 2007 and 2008. multilateral approach to global challenges finally, let me turn to the international economic order and developments in multilateral institutions over the past few years. the international order and norway in recent years, increasingly assertive non - statutory bodies have emerged in the area of international economic and financial collaboration, most notably the g20. when the global financial crisis unfolded, the g20 4 rose to the task. nevertheless, i believe that the role of non - statutory bodies and the statutory institutions, such as the international monetary fund ( imf ) 5, must be reconsidered to promote the necessary multilateral approach to global governance. norway has a long - held tradition of participating actively in multilateral cooperation and institutions has actively backed the multilateral responses to the financial crisis. as a global investor with an open market economy, norway has a strong and vested interest in the wellbeing of global financial markets. this interest is shared with most market participants, large and small. we have a common interest in a market - based international order, supporting a level playing field and sound economic governance. lessons from the crisis a key lesson from the global crisis is the need for multilateral cooperation and collective action. it relates to the framework for polices on prevention, resolution, reform and implementation. it also relates to the institutional set - up. the imf has played a pivotal role in presenting the initial lessons from the crisis, in providing finance to countries with temporary balance of payments needs, and in preparing the overall framework for