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Friday, June 21, 2024

Solberg budgets for better times ahead

Prime Minister Erna Solberg found a way around her own government’s rules against meetings this week, to start hashing out a state budget proposal for 2022. She and her ministers face enormous budget uncertainty, over the state of a post-Corona economy and whether she’ll still be in office to carry it out, but her government predicts fairly rapid economic recovery.

Prime Minister Erna Solberg (far left) led her ministers into a press briefing at Hurdalsjøen north of Oslo on Tuesday. Their job is to hammer out a state budget for 2022. PHOTO: NRK screen grab

“We have to move forward,” Solberg told reporters after arriving on Tuesday at the Hurdalsjøen Hotel north of Oslo, in the midst of a week plagued by record-high infection rates and even stricter Corona containment measures.

“We have to prepare a budget for 2022,” Solberg added matter-of-factly. Her finance minister, Jan Tore Sanner, thinks that despite all the uncertainty now, 2022 will be “a good year” for the Norwegian economy.

Solberg tackled the government’s decision to even hold its traditional budget conference head-on. “We had a discussion about whether we should drop the meeting,” she said, not least since the latest round of Corona restrictions actually prohibits such gatherings. They decided, she said, that there would be better infection control in Hurdal than in her own office in Oslo. “Everyone who’s here, and who’s coming here, has been tested,” she added, and she promised they’ll all stay at least two meters away from each other over the course of their meeting.

The goal, according to Sanner, is to come up with a budget that will meet the standard rule of not using more than 3 percent of the value of Norway’s Oil Fund. “We have spent lots of oil money (during the past year),” he readily admitted, referring to all the economic compensation and stimulus packages needed during the Corona crisis. He claimed it’s been necessary, to avoid even higher unemployment and more bankruptcies.

“It can still be tough for awhile,” Sanner said at a press briefing before the government got down to work, ” but we believe (economic) activity will pick up when enough people are vaccinated.” And that Norway’s economy will rebound.

Solberg said next year’s budget “will be more normal” than this year’s. PHOTO:

The state budget for 2022 “will be more normal,” Solberg told news bureau NTB before the meeting began, but will still include provisions “to take us into the times after the pandemic.” She said it “won’t be a crisis budget,” like last year’s revised budget was, and this year’s is.

The pandemic will still affect the budget to a large degree,  she said, “but we hope and think that all the infection prevention measures that have halted activity won’t be there in 2022.” That can help keep the government from dipping into the Oil Fund to finance crisis packages.

The Norwegian government has so far withdrawn an extra NOK 240 billion (around USD 23 billion) last year and this year for everything from economic compensation for Corona containment measures and unemployment benefits for those laid off. Since the Oil Fund kept growing, the withdrawals amounted to around 3.3 percent, more than allowed but not as much as might have been expected. The country has also been able to avoid taking on any debt, thanks to having one of the world’s largest sovereign wealth funds fueled by oil revenues over the past 25 years.

The biggest challenge ahead will be to bring down high unemployment and counter an expected wave of bankruptcies that hasn’t hit yet. Norway’s economy has so far performed much better than expected, prompting some economists to dismiss all the “Corona crisis talk” and point out that only some industries (like travel, restaurants and retail) have been hit hard. Others are doing well.

Now it’s an election year in Norway. While Solberg’s own Conservative Party is doing well, her government coalition partners are performing poorly. The left-center parties look likely to take over after the Parliamentary election in September, with Solberg unlikely to win a third term. Her budget proposal will be up for negotiation in Parliament regardless. Berglund



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