Monetary policy and wealth management in a small petroleum economy
Governor Øystein Olsen, Norges Bank
Harvard Kennedy School, Cambridge, MA
9 April 2013
0 20 40 60 80 100 120 140 160
0 20 40 60 80 100 120 140 160
1900 1915 1930 1945 1960 1975 1990 2005
Oil wealth has brought strong rise in prosperity
GDP per capita, Norway
1). Index, Sweden = 100
Source: OECD and Statistics Norway
1) Adjusted for PPP
Terms of trade
Index. 1994 =100
50 100 150 200 250 300
50 100 150 200 250 300
1994 1999 2004 2009
Norway
New Zealand Canada Australia
Real exchange rate
Index. 1994 =100
Source: World Bank, BIS and Norges Bank
50 70 90 110 130 150 170
50 70 90 110 130 150 170
1994 1999 2004 2009
Norway
New Zealand Canada Australia
1.5 1.6
1.7 1.7 1.9 1.9
2 2
6.8 7
0 2 4 6 8
Venezuela Angola UAE Norway Iran Iraq Nigeria Kuwait Saudi Arabia Russia
Largest oil exporters in 2011
Oil includes NGLs and condensates In millions of barrels/day
Source: KBC Market Services and The Norwegian Petroleum Directorate
25.4 29.1
30.7 36.3
39.4 55.8
69.5 94.9
100.6
186.5
0 100 200
Australia Malaysia Turkmenistan Netherlands Indonesia Algeria Canada Qatar Norway Russia
Largest gas
exporters in 2010
In billions of scm
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0
1978 1983 1988 1993 1998 2003 2008
Non-commodity services Non-commodity goods
Basic chemicals, chemical and mineral products
Basic metals
Refined petroleum products Oil services
Mining and quarrying Crude oil and natural gas
Norwegian exports
Shares of total value of exports
Sources: Statistics Norway and Norges Bank
The Government Pension Fund Global and the fiscal rule
Petroleum revenues + return on investments
Pension Fund Global
Transfer to finance non-oil budget deficit
Non-oil revenues
Expenditures
GPFG Fiscal Budget
Fiscal rule: Over time
spend real return on the GPFG, estimated at 4% annually
Projected size of the oil fund 1)
0 200 400 600 800 1000 1200
0 20 40 60 80 100 120 140 160 180 200
2001 2005 2009 2013 2017
Billions of USD (right-hand scale) Percent of GDP (left-hand scale)
Sources: Ministry of Finance (National Budget 2013) and Norges Bank 1) Quarterly figures to end-2012, annual figures thereafter
Structural non-oil budget surplus
As a percentage of trend GDP for mainland Norway
1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 -8 -6 -4 -2 0 2 4 6
-8 -6 -4 -2 0 2 4 6
Structural non-oil budget surplus Demand from petroleum activities¹⁾ Output gap²⁾
1) Deviation from trend
2) Output gap (level) measures difference between GDP and estimated potential GDP for mainland Norway
Sources: Ministry of Finance, Statistics Norway and Norges Bank
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500
1990 1995 2000 2005 2010
Balance sheet
Deposits from banks
The size of Norges Bank’s balance sheet including the oil fund
In billions of NOK
Source: Norges Bank
50 70 90 110 130 150 170
50 70 90 110 130 150 170
1994 1999 2004 2009
Norway
New Zealand Canada Australia
90 95 100 105 110 115 120 125 130
0 20 40 60 80 100 120 140 160
1994 1999 2004 2009
Oil price 1) (left-hand scale) Real exchange rate (NOK) (right-hand scale)
Sources: BIS, Bloomberg and Norges Bank
Real exchange rate
Index. 1994=100
Real exchange rate and oil price
Index. 1994=100
1) Brent blend (USD/barrel), nominal
Inflation
Moving 10-year average and variation in CPI. Percent
0 2 4 6 8 10 12 14
0 2 4 6 8 10 12 14
1981 1988 1995 2002 2009
Variation CPI
Inflation target
Sources: Statistics Norway and Norges Bank
0 1 2 3 4 5 6 7
0 1 2 3 4 5 6 7
2008 2009 2010 2011 2012 2013 2014 2015 2016
MPR 1/13
30% 50% 70% 90%
Key policy rate in the baseline scenario
Percent
Source: Norges Bank
Governance structure
Stortinget (Norwegian parliament)
Ministry of Finance
Norges Bank Executive Board NBIM
• Government Pension Fund Act
• National Budget
• Annual white paper
• National Accounts
• Mandate
• Quarterly and annual reports
• Investment strategy advice
40%
41%
19%
35%
54%
11%
Target
Changing the regional allocation
Of which: Emerging markets 6%
Starting point
Of which: Emerging markets 10%
Sources: NBIM and Ministry of Finance
Quarterly reports including financial reporting
Complete holding lists and voting records
Real-time market value
All public information
published on www.nbim.no
