Friday, 6 July 2012

A Financial Analysis of Norway, Part II cont.: Net Exports

In the previous post in this series we analysed Norway's GDP which included investments in and net exports of crude oil and natural gas. In this post the oil and gas component is removed from Net Exports to see how the country is performing without it. The point of this exercise is to see how Norway is performing without oil and gas and hence how mainland Norway is performing as explained in Part I of this series. Remember, mainland Norway is Norway without oil and gas (i.e. Norway without offshore).

Net exports with and without Crude Oil and Natural Gas

Before discussing the adjusted GDP, we need to have a look at the reported components of Net Exports (exports less imports) which consists of the following four items: "Traditional Goods", "Crude Oil and Natural Gas", "Ships, Oil Platforms and Aircraft" and "Services". For the period 1970 to 2000 the component values (all data for the charts are from Statistics Norway), including total Net Exports, are as follows:

And for the period 2000 to 2011 the same component values look like this:

A general trend in both charts is an increase in Net Exports (except for 2008-2011) driven by an increase in net exports of Crude Oil and Natural Gas and a decrease in net exports (i.e. an increase in net imports) of Traditional Goods. Norway is therefore completely dependent, more so now than ever, of imports of Traditional Goods from abroad. By and large, net exports of Ships, Oil Platforms and Aircraft and Services have remained fairly flat throughout the period and too small to comment on here other than to say there has been no progress (in fact there has been a small decline) for these two items since 1970. To give you an idea just how important exports of oil and gas is for the Norwegian economy, for the period 2000 to 2011 net exports of oil and gas represented 137% of total net exports and made up 20% of GDP. Further, if net exports of oil and gas of NOK 547.627 billion were removed from the corresponding total net export figure of NOK 375.429 billion, total net imports would have been NOK 172.198 billion for the year (so excluding oil and gas the country is no longer a net exporter, but a net importer).

On the net export front therefore, the country performs poorer now than in 1970 and has increasingly become a bigger net importer for items other than oil and gas during the last 41 years. The chart below depicts the increasing percentage of GDP attributed to net exports of oil and gas (except for the last three years as net exports of oil and gas decreased during that period).

Next time we'll have a look at the GDP figure for mainland Norway (i.e. GDP excluding oil and gas).