Economic Survey 1-2003

2002 was a turbulent year for the Norwegian economy. The international downturn with falling interest rates, declining stock markets, fears of war and rising oil prices also influenced domestic developments. The value of the Petroleum Fund fell instead of growing, and the return was markedly lower than expected. Weakening profitability and activity in what was recently described as the new economy left a clear mark on the labour market. Continued high wage growth and a tight monetary stance contributed to a record-strong deterioration in competitiveness for the second consecutive year, with notices of relocation of production abroad and closures in internationally exposed industries. The international downturn and loss of markets shares for Norwegian enterprises led to a virtual halt in output growth in the Norwegian economy through 2002, following several years of low growth. This occurred in spite of brisk growth in domestic demand. In addition, the year ended with more negative news of low water reservoir levels and very high electricity prices. On the other hand, 2002 was a year with record-high growth in household real disposable income and inflation was kept at bay. A high and relatively equal distribution of wealth, continued low unemployment and solid national and public finances meant that last year was another year when Norway was among the countries that fared best.