Norway urged to check public spending growth

5 Mar 14
Norway must continue its economic reforms and constrain public spending growth to ensure financial stability and future prosperity, the Organisation for Economic Co-operation and Development said today.

By Judith Ugwumadu | 05 March 2014

Norway must continue its economic reforms and constrain public spending growth to ensure financial stability and future prosperity, the Organisation for Economic Co-operation and Development said today.

Discussing the challenges Norway will face in the years ahead, the OCED recognised the country’s determination to strengthen its financial capabilities through the use of new policy tools to help policymakers prevent and manage financial crisis, notably housing market-related risks.

Speaking at the launch of the Economic survey of Norway report, OECD secretary-general Angel Gurría highlighted how the country’s use of petroleum income had protected Norway from the worst effects of the financial crisis and recession.

But, with petroleum production now declining, the OECD urged Norway to ignite public support for innovation and a strong competition policy to increase productivity and maintain growth in living standards.

‘Norway should consider a longer-term policy of keeping its non-petroleum budget deficit well below the 4% of GDP [gross domestic product guideline] in view of the stronger-than-expected increase in the assets of the Pension Fund, uncertainties in the future rate of return on the Fund, pressure of demand in the economy and fiscal challenges due to ageing,’ the OECD said.

It also recommended that Norway gradual reduce taxation by constraining the growth of public spending to below that of national income.

‘Improving the efficiency of public spending is also important, particularly in new transport investments, where the focus should be primarily on cost efficiency in project choice, construction and maintenance,’ the OECD added.

Gurría noted: ‘Norway’s prosperous and well-managed economy is offering admirable levels of economic and social well-being to its citizens.’

‘While petroleum resources offer huge advantage, it is not always easy to manage such wealth and keep the rest of the economy in balance. Norway’s Pension Fund helps protect the economy from the vagaries of commodity prices, spreads resource wealth across generations, and offers a roadmap for other countries seeking to maximise returns from their endowment of natural resources.’

 

 

 

 

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