Norway needs an immediate shift in how it allocates its oil wealth to avoid an economic slump as a fading oil industry and high costs threaten growth, Prime Minister Erna Solberg said.
“We need to take steps today to avoid a hard landing,” she said today in the text of a speech at the University of Oslo. “The government will prioritize the use of oil wealth as was the original intention: investments that strengthen the growth potential of the Norwegian economy.”
Scandinavia’s richest nation has used its oil and gas income, which it has funneled into an $850 billion sovereign wealth fund, to protect against Europe’s economic slump. Still, the reliance on petroleum, both for income and investments, has weakened other areas of the economy and hurt competitiveness.
Statistics Norway last week cut growth forecasts in the mainland economy, which excludes oil and gas, through 2016 as oil investments fall and record consumer debt weighs on households. Norwegian wages that far exceed the European average are also holding back the economy. The average salary in Norway is 60 percent higher than the in the euro-area, Solberg said.
The Conservative-led government has pledged to stop eroding trade competitiveness as it prepares for more tax cuts and infrastructure investments.
“If we do nothing, we may experience a hard landing in the future if terms of trade change,” Solberg said. “We’re not defenseless against changes.”
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