The Norwegian economy has weathered the global financial crisis remarkably well. Growth has already resumed after a comparatively mild recession. This is the conclusion of a report from the International Monetary Fund (IMF).(Photo: Finance Minister Sigbjørn Johnsen)
The IMF report was presented by a visiting IMF delegation in Oslo on Monday.
It went on to state that unemployment has remained at low levels. Norway’s resilience has been underpinned by a substantial easing of macroeconomic policies, continued strong investment activity in the oil and gas sector, high public-sector employment, limited dependence on the hardest-hit segments of global manufacturing, and the relative stability of the domestic financial sector.
"The mission’s statement is an important contribution to the domestic debate on economic policies. IMF notes that the economic policies implemented by the Norwegian Government have been effective in counteracting the financial crisis", says finance minister Sigbjørn Johnsen.
Looking ahead, IMF says, the economic recovery in Norway is expected to continue. After declining by more than 1 percent in 2009, mainland real GDP is projected to grow at around 2 percent in 2010, with private domestic demand progressively replacing public spending as the main driver of growth. Private consumption should strengthen further as households continue to benefit from low interest rates, steady employment, and higher asset prices. A turn in the inventory cycle and buoyant offshore investment should also support activity, even though mainland investment may remain subdued and the growth contribution from net exports is likely to decline. Unemployment is set to rise somewhat, but remain relatively low. In the near term, inflationary pressures should be kept in check by slower wage growth and a stronger krone, although tighter cyclical conditions may reemerge sooner than in many other advanced economies gveni the relatively limited spare capacity in the economy.
However, one warning towards the end of the IMF-report has made headlines in Norwegian media: Norway needs to curb the high sickness and disability schemes.
The IMF states:
The key challenge to long-term fiscal sustainability is the rapid rise of aging-related expenditure. The authorities’ pension reform appropriately aims to encourage longer working lives and contain the rise of pension outlays by tying benefits to demographic developments. For the reform to be successful in achieving these goals, however, it will need to be supplemented by concrete steps to curb the very high inflows into sickness and disability benefit schemes. It is crucial to build broad public consensus on the need for effective reform in this area. Measures should be geared toward improving the incentives of employees and employers, in both the private and the public sector, and could include greater use of cost-sharing and increased reliance on specialized social insurance physicians in assessing and verifying eligibility for benefits.
This comes at a time when discussions are running high around this issue. Prime Minister Jens Stoltenberg has stated that the increasing absence due to sickness and related costs cannot continue.
The Norwegian unions on the other hand warn the Labour-led government that touching sickness benefits means war.
(NRK/Press release)
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