NORWAY'S ECONOMY THRIVES OUTSIDE WARM EMBRACE OF EUROPEAN UNION

NORWAY'S ECONOMY THRIVES OUTSIDE WARM EMBRACE OF EUROPEAN UNION

Just nine months after Norway rejected membership in the European Union and opted for isolation in the far north, its economy is surfing high on a wave of oil and good tides.

Norwegian business is booming, the Oslo stock exchange has set a string of record highs, unemployment is coming down and economists see few clouds on the horizon - at least for now."It was never going to be economic disaster for Norway not to be in the EU," said Keld Holm, a senior economist with investment bank Lehman Brothers in London.

''Norway is probably the only country in Europe which could afford to be outside the EU," he said, adding that Oslo would only feel the disadvantage of being outside in the long run. "You have the oil and everything is fine for the next 20 years."

Oil and gas production is rising steadily with Norway looking set to become the world's second-biggest crude exporter after Saudi Arabia this year. And before the end of the year, the country will probably have repaid its net foreign debt.

The international economic upturn has also blessed Norway's 4.3 million people with higher prices for metals, another commodity which helps finance a cradle-to-grave welfare state.

The statistics office forecasts gross domestic product to leap by 4.8 percent this year and 3.7 percent in 1996 and the Norwegian crown is strong and stable.

"I don't think Norway is very much affected by being outside (the EU). It's more a question of whether you want the cake now or rather give more cake to your kids," said Michael Dicks, an economist with J.P. Morgan in London.

Before the November 28 referendum, many in the pro-EU camp warned that a ''no" could cost jobs and scare off investment - especially since neighboring Sweden, Norway's biggest trading partner, and Finland voted to join the EU.

But they also stressed there would probably be no dramatic effects in the short term should Norway choose isolation, and so far there seems to be no reason to worry.

"We might have seen some more investments, especially within the food processing industry," said Tor Steig, chief economist with the Confederation of Norwegian Business and Industry (NHO).

However, Norwegians themselves are investing heavily and the statistics office forecasts investments in mainland Norway - which excludes petroleum and the large shipping sector - to grow by 15.4 percent this year from 6.2 percent in 1994.

But economists warn against possible economic overheating and urge Norway to prepare for the day when the North Sea is drained of oil and gas and it must rely on other business.

The Labour government, which strongly favors EU membership, next year

plans to set aside cash in a Petroleum Fund which will be invested abroad. It has also tightened the state budget and intends to present a budget surplus in 1996.

"Inflation will definitely pick up further in Norway. The main problem will be for 1996," said Holm with Lehman Brothers.

The statistics office sees consumer price inflation of 2.5 percent this year and 2.4 percent in 1996.

But although economists agree that Norway had little to reap from EU membership in the short run, it might have enjoyed lower interest rates now had it decided to join the club.

"I believe we would have had the same interest rate level as Germany or even lower had we been a member," said NHO's Steig.

Even so, Norway seems to manage fine on its own and the financial sector is far from paralyzed.

Meanwhile, the EU referendum belongs to the past and Prime Minister Gro

Harlem Brundtland recently said she had no plans to revive the issue before the turn of the century.

"Ultimately, I believe Norway will end up joining. But you've got to admit it's a long time away - 30 to 40 years," said Mr. Dicks of J.P. Morgan.