Beans: Norway's National Day

Today is May 17th, Norway's national day. Norway is a very little nation with just 4.6 million people, but its economy is of greater importance than that small population size would suggest. Although Norway's non-oil economy is also far more advanced than that of Middle Eastern oil producers, this is mostly because of its vast oil resources.

Norway is the world's third largest oil exporter, after Russia and Saudi Arabia. But the per capita level of oil exports is far higher in Norway, who only have 4.6 million people, compared to 27 million (Including 6 million guest workers) in Saudi Arabia and 143 million in Russia.

Because of higher oil prices, Norway surpassed the United States as the second richest country in the world (Luxembourg is #1) in 2004 even using the PPP-adjusted measure of GDP per capita (It surpassed it long ago using current exchange rates) and increased its lead dramatically in 2005. Nominal GDP increased 11% in 2005 to 1906 billion Norwegian kronor, which is roughly $310 billion, or $67000 per capita. The increase was less than 6% excluding oil.

And because Norway's government have decided that its government budget should be balanced excluding oil and that all oil revenues should automatically go to a special oil fund which only invest in foreign securities, this have created gigantic "twin surpluses" in Norway's budget and current account balance.

In April 2006 for example, Norway had a trade surplus of 35.75 billion Norwegian kronor (roughly $6 billion), up from 26.75 billion kronor ($4.5 billion) in April 2005. During the first 4 months of 2006, the surplus was a full 132.4 billion kronor ($22.5 billion), up from 99.3 billion ($17 billion) in the first 4 months of 2005. A monthly trade surplus of $6 billion is hugh for a country of 4.6 million. It's as if the U.S. would have a monthly trade surplus of $390 billion per month (month, not year).

With a trade surplus running at an annual rate of about $70 billion and with a growing investment income surplus due to this massive accumulation of foreign securities little Norway is playing an increasing role in the creation of global imbalances.

The main reason for this surplus is the surging oil revenues and the fact that the Norwegian government automatically recycles the revenues in global financial markets. And as the populist semi-libertarian Progress Party is the only party that wants to end (or at least reduce) this policy of massive forced savings , Norway's contribution to global economic imbalances is set to grow as long as oil prices rise or at least do not fall.

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