There have been a lot of ups and downs in the history of Norway’s economy. In general, the country has a relatively stable economy with a large state sector and a vibrant private sector. Currently, Norway is one of the world’s richest countries, according to the World Bank. The reasons for Norway’s economic growth aren’t difficult to explain, because it’s surrounded by the North Sea which is rich in oil and gas. Even more, when someone mentions Norway, the first thing that immediately springs up to economist’s heads is oil, as Norway’s economy mainly depends on oil and gas production. This is why problems in the oil sector usually easily reflect on the overall economy. But some economic experts still believe that Norway would have been a rich country even without oil, as it has many natural resources. 

The turning point in Norway’s economy

However, the economy often faces huge challenges, and one of the major problems of the country was back in 2016 when oil prices collapsed. BBC called it a Dutch disease which is a term describing the causal relationship between the increase in the economic development of a specific sector and a decrease in other sectors. Usually, it’s a paradox that happens when good news harms the country’s broader economy and this was exactly the case in Norway. The reason for this was an overreliance on the oil and gas industry. 

Sudden problems in the oil industry directly caused the devaluation of the national currency, krone which is heavily dependent on oil and gas production. People consider this immediate fall in 2016 as a turning point in Norway’s economy as it was the first time when the experts began to realize that Norway could no longer rely on oil to fuel growth in its economy and the Norwegian economy had to diversify, as no one could be sure where the oil prices would go. 

Major changes

Today’s data suggests that the situation in Norway changed to some extent. 20% of the Norwegian GDP in 2020 consists of oil and gas production, but other important sectors include hydropower, fish, forests, and minerals. Back in 2016, a rise in the aluminum industry, the healthcare sector, and fish farming was predicted to make Norway’s economy more diversified. As a means of diversification, the government also prioritized education, and recently there have been few changes in the gaming industry as well. For example, the country’s gambling regulator, Lotteritilsynet plans to unify three different gambling laws and make a holistic approach to the Lottery Act, the Gambling Act, and the Totalisator Act. This type of development is going to encourage new Norwegian online casinos to not only start vying for a market share in the country but also reach to overseas markets in the UK and maybe even in Eastern Europe, thus providing more job opportunities and serious channels of income through taxes for the country. Doing so is important for improving the general gambling situation in the country and increasing the security level, which will help the gaming sector support economic growth.

Other than this, there have been certain success cases in diversifying the economy. As we already mentioned, the investments in the education sector are more frequent and the government actively promotes Science, Technology, Engineering, and Mathematics (STEM) subjects, along with entrepreneurial skills. During these years, it has launched courses to raise the quality of teaching and the status of the profession, changed policies to support early childhood education, promoted several innovations in educational research, etc. 

According to Weforum, there have been changes in the environmental sector as well, and although it has benefitted from selling fossil fuel reserves for years, in 2017 98% of its energy production came from hydropower and other renewable resources. Using natural resources helped Norway to become one of the most prosperous economies in the world. Other than this, the government decided to invest more in the technologies, and as a result, now Norway even ranked as the world’s most advanced nation in the terms of digital media and it has a big potential to advance in the technological market and become the next California, Singapore, or China. 

As for the health sector, The predicted changes weren’t fully implemented because of the coronavirus outbreak, as the scientists had to delay their plans temporarily and focus fully on the pandemic and its effects on the public health. However, another plan was to invest more in the aluminum market and there was a big rise. The Norwegian company is one of the world’s biggest exporters of aluminum and recently it played a huge part in the country’s economic growth. Although there was a decrease in hydropower, the aluminum market was a big success, and still, it is expected that the aluminum demand for 2020 will grow by 0-2%. 

This is why some experts think that oil isn’t a secret to Norway’s economic success. As Ola Grytten, a professor at the Norwegian School of Economics believes, if Norway didn’t have oil, it would have invested much more in the industries like fish farming or producing seafood and it would still be one of the richest countries in the world. 

Conclusion

Finally, we can say that traditionally, Norway’s economy has focused around the sea, with oil, gas, and fishing but now as they realized that these natural resources are finite, they decided to turn to technologies and invest much more in the adoption of advanced technology. But some things haven’t changed. Although there have been many attempts at economic diversification, the petroleum sector is still very important in Norway. However, as time goes by, and the oil sector faces challenges such as the current offshore oil workers strike, the country starts to realize that they can’t completely rely on oil and they need multiple sources of income from different sectors and markets to remain stable and encourage economic growth. This is why it’s clear that economic diversification is vitally important for Norway to remain a leader in the global market.