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Atle Willems, CFA
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Atle Willems, CFA, is an equity investor with a long-term view investing in undervalued listed shares with solid operational track records and sensible balance sheets. He holds a master's degree in finance from Nottingham University Business School, a bachelor's degree in business... More
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EcPoFi - Economics, Politics, Finance
  • A Financial Analysis Of Norway, Part II: GDP 0 comments
    Jul 31, 2012 6:52 AM

    As the chart in Part I of this series demonstrated, government spending has outpased private consumption at least from the early 1970s (as long as we have data for). Digging further into the data from Statistics Norway reveals the following:

    • During the last 12 years, government spending expanded an average of 6.8% a year while private consumption averaged 5.5%.
    • During this same period, government's annual spending increased from NOK 286.104 billion in 2000 to 585.795 billion in 2011, a total increase of NOK 299.691 billion. The corresponding figures for private consumption were NOK 640.005 billion in 2000 and NOK 1,128.593 billion in 2011, a total increase of NOK 488.588 billion.
    • For the period 2008-2011, government spending increased on average 7.2% a year while private consumption was up 4.4% a year.

    As is evident above, government spending has outpased personal consumption for a long time. Especially noteworhy are the figures since 2000 which demonstrate a substantially higher percentage increase in government spending vs personal consumption.

    The next chart shows the major GDP components' percentage share of GDP since 1970 (private consumption, government spending, gross investments and net export).

    As the chart shows, private consumption's share of GDP has shrunk from 52.4% in 1970 to 41.5% in 2011. At the same time, government spending increased from 16.4% of GDP in 1970 to 21.5% in 2011. Gross investment (private and government) on the other hand actually decreased as a percentage of GDP, from 31.9% in 1970 to 23.2% in 2011. Net exports has changed dramatically during the period analysed, from a negative 0.6% in 1970 (meaning Norway was a net importer at that time) to 13.8% of GDP in 2011. This was fueled, literally, by increased exports of crude oil and natural gas, but more on this later. Doing the same analysis for the period 2000 to 2011 reveals the following (see also chart below):

    • Private consumption's share of GDP decreased from 42.3% in 2000 to 41.5% in 2011

    • Governement spending increased from 19.35 of GDP in 2000 to 21.5% in 2011
    • Gross investment increased from 20.4% in 2000 to 23.2% of GDP in 2011
    • Net exports decreased from 17.1% in 2000 to 13.8% of GDP in 2011

    The analysis above focused on total GDP as reported by Statitistics Norway and showed that there has been a clear trend towards increased government spending and decreased personal consumption, both in growth rate and as a percentage of GDP, not only since 1970 but also during the most recent years.

    In the next posts in this series, the GDP figures will be adjusted for crude oil and natural gas to see what the corresponding figures are for mainland Norway.

    Themes: Macro View
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