Counting the Oil Money and the Elderly: Norway's Public Sector Balance Sheet

IMF Working Papers, August 27, 2018

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Counting the Oil Money and the Elderly: Norway's Public Sector Balance Sheet

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Bibliographic details

• Authors: Ezequiel Cabezon, Christian Henn
• Published: August 27, 2018
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781484370117.001

Summary and central conclusion

• Based on a public sector balance sheet analysis that accounts for future aging costs, the paper reaches the opposite conclusion to Gagnon (2018)'s permanent income analysis: Norway has not necessarily saved too much.
• Norway’s intertemporal financial net worth (IFNW) is negative, at about -240 percent of mainland GDP.
• Because IFNW represents an intertemporal budget constraint, this implies that Norway’s savings are likely insufficient to address aging costs without additional fiscal action.

Major quantitative findings

• Current assets exceed liabilities by some 340 percent of mainland GDP.
• Nonoil fiscal deficits have grown very large (to almost 8 percent of mainland GDP).
• IFNW is negative, at about -240 percent of mainland GDP.

Analytical framing and implications

• The divergence from Gagnon (2018) arises chiefly because the public sector balance sheet approach explicitly accounts for future aging costs, which the permanent income analysis did not fully incorporate.
• Large nonoil fiscal deficits combined with mounting aging pressures create an intertemporal financing gap despite very large current asset holdings.
• The negative IFNW indicates that, absent additional fiscal adjustments, existing savings (including oil wealth) may be insufficient to cover projected aging-related obligations.

Policy implications and recommended direction

• Additional fiscal action will likely be required to ensure long-run intertemporal sustainability given:
  • the sizable nonoil fiscal deficits (almost 8 percent of mainland GDP), and
  • the onset of aging pressures that are only commencing.
• Monitoring and integrating aging-related liabilities into public sector balance sheet assessments is essential for accurate assessment of fiscal sustainability.

Publication metadata (from source)

• Authors: Ezequiel Cabezon, Christian Henn
• Publication: IMF Working Papers, Working Paper No. 2018/190
• Date: August 27, 2018
• Pages: 55
• DOI: https://doi.org/10.5089/9781484370117.001

Source: Counting the Oil Money and the Elderly: Norway's Public Sector Balance Sheet (IMF Working Paper No. 2018/190).

Content in this bundle

• Counting the Oil Money and the Elderly: Norway’s Public Sector Balance Sheet, WP/18/190, August 2018
  • Counting the Oil Money and the Elderly: Norway’s Public Sector Balance Sheet, WP/18/190, August 2018 (Markdown version)
  • Counting the Oil Money and the Elderly: Norway’s Public Sector Balance Sheet, WP/18/190, August 2018 (PDF)