New state budget due to be tight
September 1, 2011
Norwegian Finance Minister Sigbjørn Johnsen oversees one of the strongest national economies in the world right now, but still warns that he intends to present a tight state budget proposal for 2012. Instead of fending off a new finance crisis with more spending, like Norway did in 2008, Johnsen intends to cut back.
“The situation now is completely different now,” Johnsen told newspaper Dagens Næringsliv (DN). In 2008, when Lehman Bros collapsed, the banks stopped lending to one another and higher unemployment loomed also in Norway. “Now we have a state debt crisis in many countries, which leads to greater uncertainty over how they’ll cut their budgets, reduce debt and boost private consumption.”
Meanwhile, the Norwegian economy remains extremely strong and prospects are bright with new oil discoveries in the North Sea, an oil price that’s still high and an offshore industry due to gain from new oil exploration and extraction. State statistics bureau SSB reported last week that growth rates are rising, and not just offshore. Mainland economic activity is strong as well.
“The numbers confirm that it’s going well in Norway,” Johnsen told DN. The Norwegian economy is growing faster than long-term trends and unemployment remains low. Norway is avoiding the crises occurring elsewhere, “but that still poses demands about how we will manage the economy. We must have a tight budget to shore up confidence in it.”
Johnsen, working under difficult conditions since Norway’s government complex was bombed by a right-wing extremist on July 22, will nonetheless present the state budget on schedule early next month. While recent budgets have allowed more spending of Norway’s oil wealth, Johnsen says it’s important to show restraint now, to protect jobs in private business facing tougher competition from abroad. Weak growth abroad can hurt Norwegian industry, so it’s important to reduce government spending to also help keep inflation and interest rates low.
Local economists still call Norway’s economy “very solid” and Knut A Magnussen of DnB NOR Markets is among those expecting more good times ahead despite a tight state budget.
“In many ways, we can continue to be an annerledesland (literally, ‘a country where things are different’),” Magnussen told DN.
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