Budget more expansive than expected
October 6, 2011
The senior economist at Norway’s biggest bank, Kyrre Aamdal, said the state budget presented to Parliament by the left-center government on Thursday held “no big surprises” but was “a bit more expansive” that expected.
Aamdal told news service dn.no that he thinks the budget, on the whole, was in line with the comments and warnings made by government officials before it was presented. Both Prime Minister Jens Stoltenberg and Finance Minister Sigbjørn Johnsen have repeatedly said the budget would be tighter that in recent years with strict limits on use of oil revenues.
Some think it could have been even tighter, and opposition politicians were expected to come with such criticism as debate over the budget began. Since the government parties have a majority in Parliament, though, it’s likely the budget formally turned over by Johnsen will be approved.
The government has proposed using more oil revenues than last year, an increase of 0.3 percent o NOK 10 billion. That’s more than DnB NOR’s economists and analysts had expected, even though the total amount is less than what the rule for limiting use would allow.
“It’s a bit more expansive than we thought,” Aamdal told DN. He noted that the budget otherwise implies economic growth of around 3 percent next year.
“It looks like they believe it will go well for the Norwegian economy through next year, despite the crisis situation we have in Europe,” Aamdal said.
Knut Anton Mork, chief economist at Handelsbanken Capital Markets, also characterized the budget as expansive. “It’s tighter than the (oil revenue use) rule allows but we can otherwise call it expansive,” Mork told dn.no, adding that he doesn’t predict much market reaction. The finance markets react to oil revenue use, and that’s been kept in check.
There’s room for more use of oil money if economic growth slows, or the troubles in Europe hit Norway hard. “I think it’s interesting that the government is bragging that the budget is tight,” Mork said. If the economy weakens, he said, the situation may change quickly “and they’ll begin to talk about stimulus again instead.”
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