Finance Minister Siv Jensen has long wanted to invest more of Norway’s oil revenues at home, in everything from better roads to more nursing homes, instead of in stock markets abroad. She’s nonetheless going along with plans to tap the country’s huge Oil Fund for even less than the conservative government coalition projected in its already tighter state budget proposal last fall.
Jensen was presenting the government’s revised state budget proposal to Parliament on Tuesday, suggesting that it tap the Oil Fund for NOK 5.6 billion (USD 700 million) less than called for in the original. The withdrawal would amount to just 2.7 percent of the fund’s total holdings at the beginning of this year, down from the 2.9 percent initially proposed.
That in turn is way down from the 4 percent that Norway’s governments were earlier allowed to use, a figure long believed to be in line with the Oil Fund’s average returns over the years. That figure was recently cut to 3 percent to reflect low interest interest rates and generally expected lower returns.
Jensen’s proposal was also likely made to counter any criticism that the Norwegian government is using too much of its oil money and should save more of it for future generations. It also reflects Norway’s resurgent economy after the oil price collapse in 2014.
It all boils down to the government tapping the Oil Fund for around NOK 225.5 billion this year to pad the state budget, in addition to all the tax revenues it collects. That’s still more than what was tapped in 2017 (NOK 225.1 billion), and nearly double what was spent in 2011 when Norway’s economy was still soaring, but it’s a smaller percentage of the Oil Fund itself because Norway’s national “piggy bank” continues to gain weight.
Jensen was doing her best on Tuesday to portray prudence in the government’s use of oil money. “We’re trying not to take so many political wishes into the revised budget,” Jensen said on state broadcaster NRK’s morning political talkshow Politisk kvarter. “We trying to get the map to better reflect the terrain.” Newspaper Dagens Næringsliv (DN) reported that her state budget proposal signifies how Norway’s use of oil money is now “flattening out” for the first time in seven years.
In other market-sensitive numbers released before her presentation to Parliament, the government’s revised budget is based on 2.5 percent growth in Norway’s mainland economy this year, which includes everything apart from the country’s biggest offshore oil industry. Growth next year is projected to be 2.6 percent. That’s a bit higher than historical trends, the government conceded in a press release Tuesday morning, but Norway’s conservative political leaders think that’s justifiable.
The government also thinks unemployment will continue to fall, down to 3.8 percent during the course of the year. That’s 0.2 percentage points lower than expected last fall.