Norway also has oil and discretion

The National looks at the similarities between Oslo and Abu Dhabi in the final instalment of the Abu Dhabi Model Economies series.
The biggest obvious similarity that Norway shares with Abu Dhabi is the discovery of oil that has helped to transform both economies. Marcel Mochet / AFP
The biggest obvious similarity that Norway shares with Abu Dhabi is the discovery of oil that has helped to transform both economies. Marcel Mochet / AFP

When Norway was chosen as a country for Abu Dhabi to emulate in its Economic Vision 2030, it seemed there were as many differences as similarities. In many ways Norway is the polar opposite, cold where Abu Dhabi is hot, Lutheran rather than Muslim.

And it is generally a quiet, sleepy place, rarely garnering any headlines except when it hands out its Nobel Prize peace awards to a controversial figure.

That all changed on Friday, July 22, when Anders Behring Breivik first exploded a bomb in the centre of Oslo, then went on a murderous shooting spree on the picturesque island of Utoeya.

More than a month later, and while the horror and the memories remain, the centre of Oslo is gradually returning to normal.

The biggest obvious similarity that the country shares with Abu Dhabi is the discovery of oil - both within a decade or so - that have helped to transform both economies from rural poverty to urban riches. And both have the blessing of a small population that means the oil wealth can be shared around.

The Norwegian government first reinvested the money, then set up a pension fund to invest the windfall for future generations. The northern European nation is now the largest producer of oil and gas per capita outside the Middle East.

The fund currently represents about US$100,000 (Dh367,000) for every man, woman and child in the country.

Its oil wealth has helped to insulate Norway from the worst of the economic downturn of 2008, and is helping to keep it ahead of its European counterparts that are struggling for growth.

Second-quarter GDP figures show that the Norwegian economy expanded steadily, rising by 0.4 per cent, a small amount but larger than Germany, France or the UK.

"It is less likely to suffer from a "double dip" than some of its European counterparts," says Ben May, the European economist at Capital Economics in London.

A key factor behind Norway's resilience is the strength of household spending. Unemployment is low and saving is high, but a 1 per cent quarterly rise in spending pushed the annual growth rate to an impressive 3.4 per cent.

However, exporters are suffering from the strength of the Norwegian currency. Exports rose by just 0.4 per cent, but given that they fell in each of the four previous quarters the annual growth rate remains in negative territory.

At times you get the sense that Norwegians feel their oil wealth is as much a curse as a blessing.

"It's a challenge to hold back on spending, especially in the health sector because the needs are always there and people say we are so rich and there are many old and sick people," says John Rogne, the chief economist at Innovation Norway. "It's the rich man's burden."

While Norway is likely to be one of Europe's better performers over the next year or two, growth is likely to be steady rather than spectacular. That is probably how the Norwegians would like it.

They prefer to be quiet and discreet and out of the spotlight - another attribute that they share with Abu Dhabi.

Published: August 29, 2011 04:00 AM


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