Economic Survey 1-2007

The economic boom in Norway continued to intensify through 2006. Economic growth was high, employment increased at a near-record pace and unemployment fell to a level close to the trough recorded in the cyclical upturn in the latter half of the 1990s. Inflation, as measured by changes in consumer prices, remained low and showed few signs of rising, when excluding a transitory increase in electricity prices. However, Norwegian export prices increased sharply through 2006, and far more than import prices. Norway's terms of trade improved substantially, and contributed to an increase of as much as 8 per cent in real disposable income for Norway in 2006. The marked terms-of-trade gains are probably transitory and in the event the income increase last year is temporary. This has been taken into account in the orientation of economic policy in that large portions of petroleum revenues are invested in foreign financial assets. This mechanism renders Norway fairly robust to income shocks to which we are exposed as a result of our oil dependence. The capital in the Government Pension Fund – Global has grown to around NOK 1 800 billion. This group insurance that Norway's substantial foreign assets represent provides the country with welfare gains, even though they are difficult to measure.