The impact of the low international oil price on the Norwegian economy.
The oil sector accounts for almost 30% of state revenues and almost 22% of GDP. The current low oil price level thus represents a formidable challenge. Growth is slowing and unemployment rising: on September 3, Statistics Norway cut its forecasts for 2015 and 2016 average GDP growth to 1.3% and 1.8%, respectively. However, Norway transformed its oil wealth into financial wealth when the oil price was high and now funds government spending from the investment returns: years of budget surpluses and a deep sovereign wealth fund (SWF) provide Norway with significant fiscal leeway.
Independent forecasts suggest growth will be weaker than official projections, at 1.3-1.6% in 2016-17.
Unemployment could rise above Statistics Norway's expected 2016 peak of 4.6%, likely to around 5.0%.
The slowdown appears to be damaging the government and boosting the opposition Labour Party before September 14 local elections.
Regions most exposed to the oil industry will be worst affected, especially around Stavanger.
The SWF plans to raise its emerging market exposure, but Asian holdings are only around 15%, offering some protection from China turmoil.
