Better numbers can cheer government

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As the price of Norway’s crude oil broke through the USD 50 mark this week, the value of the country’s currency also rose. Finance Minister Siv Jensen woke up Wednesday morning to some disappointing public opinion poll results, but can be cheered by other important numbers that back up predictions of economic recovery and suggest her policies are working.

The price of a barrel of Norway's North Sea crude oil broke through the USD 50 mark this week, as displayed here in the window of an Oslo energy firm. It kept rising, passing USD 51 on Tuesday, and that's good news for the Norwegian economy as it recovers from the oil price dive two years ago. PHOTO: newsinenglish.no

The price of a barrel of Norway’s North Sea crude oil broke through the USD 50 mark this week, as displayed here in the window of an Oslo energy firm. It kept rising, passing USD 51 on Tuesday, and that’s good news for the Norwegian economy as it recovers from the oil price dive two years ago. PHOTO: newsinenglish.no

The new numbers can also give Jensen an extra boost of confidence as she takes the podium in Parliament on Thursday to present the government’s state budget proposal for 2017. It’s widely expected to be a year of ongoing economic recovery from the oil price dive that abruptly halted the boom her predecessors in the former left-center government had enjoyed for years.

Forecasts from state statistics bureau SSB, Norway’s central bank, Nordea Markets and several other economists suggest growth across the board next year. After two years of decline, overall growth of the mainland economy (not including the oil and offshore industry) is expected to hit 2 percent, while real income will rise 0.7 percent after falling this year. An average of predictions published in newspaper Aftenposten on Wednesday also shows increases in employment, while the price of North Sea crude is also expected to rise further, to around USD 53 per barrel.

That should bring a smile back to the face of Finance Minister Jensen, whose Progress Party fell in the latest poll conducted for Norwegian Broadcasting (NRK) to 14.1 percent of the vote. The Conservatives gained, however, to 26.2 percent, so the minority government coalition still has a majority in Parliament thanks to the support of the Christian Democrats and the Liberals, who scored 4.2 percent and 4 percent respectively.

PHOTO: Stortinget

Finance Minister Siv Jensen (left) wasn’t looking very happy as she stood with Prime Minister Erna Solberg during the opening of Parliament on Monday. She may have more reason to smile next year. PHOTO: Stortinget

Jensen was otherwise getting good marks for how the government has handled the downturn that now may turn into an upturn just before next fall’s parliamentary election. “It’s been correct to have expansive budget policies,” Kari Due-Andresen, chief economist at Handelsbanken, told Aftenposten. Norway’s huge sovereign wealth fund has also helped enormously, noted the chief economist at Swedbank, Harald Magnus Andreassen. “It’s provided room in the budget framework,” he said. “At the same time, she’s been pragmatic in relation to her party’s program.”

Jensen can still tap into Norway’s oil fund to help pad her budget without raising taxes. Opinions are mixed as to just how expansive her budget will be, but she’s likely to use less oil money than she actually could under current rules. They still allow whichever government is in power to withdraw 4 percent of the total size of the fund. Last year Jensen withdrew just 2.8 percent, even though that amounted to more oil money than ever before. Calls have gone out to lower the withdrawal limit to 3 percent, since the fund has grown so large.

One thing is clear: Jensen faces a better year ahead. Real estate brokers have even declared Norway’s hard-hit oil capital of Stavanger as relatively healthy again, after seeing higher activity in its housing market in September. Prices in Stavanger also rose 1.3 percent from August levels, reversing months of decline.

The higher oil price, stable interest rates and increased economic activity have also boosted the krone, with the cost of a US dollar falling back under NOK 8 this week. The krone has also strengthened against the euro, the pound and especially against the Swedish krone. That’s good news for Norwegians out traveling, but not so good for Norway’s export industries like seafood, metals and timber. Some economists are surprised by the strengthening, and think the rise is tied mostly to the overall weakening of other currencies like the British pound following the Brexit vote.

newsinenglish.no/Nina Berglund

  • frenk

    What price of oil does Norway need to actually make a ‘real profit’….$70…$80 per barrel?