Revised National Budget
Sound economic governance
Press release | No: 21/2022 | Date: 12/05/2022 | Ministry of Finance
The Norwegian economy is unusually strong and employment is at a record low. At the same time, however, Omicron, high electricity prices and war in Europe have necessitated unforeseen financial allocations. In the Revised Budget, the government has therefore taken active steps to compensate for increased expenditure.
“The Norwegian economy is very strong. Unemployment is low, but we have to be careful to avoid overheating the economy, keep inflation under control and avoid excessive interest rate rises. Sound economic governance is currently our most important instrument for protecting household finances”, says Minister of Finance Trygve Slagsvold Vedum (Centre Party).
The extraordinary expenditure items in this year’s budget are necessary. However, such expenditures require savings to be made in other areas. High public spending in a situation of strong economic activity could trigger price and wage inflation. This in turn could necessitate sharper or more rapid interest rate rises than previously announced by Norges Bank. Excessively rapid economic growth increases the risk of sudden, powerful downturns and resulting high unemployment.
“This is why we have to reduce our petroleum revenue spending, and we are therefore proposing savings totalling NOK 17.5 billion. Revised estimates will also help improve the budget balance. Overall, petroleum revenue spending in 2022 will be approximately NOK 30 billion lower than envisaged before the Revised Budget, but still NOK 30 billion higher than in last autumn’s Amendment to the 2022 Fiscal Budget Proposal”, says Minister of Finance Vedum.
The war in Ukraine has altered the economic and security policy picture. Millions of persons have been displaced, and Europe is facing its greatest humanitarian crisis since World War II.
“Russia’s invasion of Ukraine has triggered a substantial increase in defence and public security allocations. The government will ensure that refugees coming to Norway receive the help they need”, says the Minister of Finance.
Budget policy leeway will be reduced going forward, and the impact of the war in Ukraine on future budgets is uncertain. Thus far, Norway’s petroleum revenues have increased, while the value of the Government Pension Fund Global has fallen.
“We are highly conscious of our responsibility to manage tax revenues wisely, and have a strong focus on investing national funds as effectively as possible. We have therefore decided to suspend a number of expensive national construction projects, and will also carry out a broad review of planned investments. This includes cuts to planned projects in the new government district in Oslo”, says Vedum.
Table 1. Key figures for the Norwegian economy. Percentage volume change from previous year, unless otherwise stated
|
|
NOK billion1 |
|
|
|
|
|
2021 |
2021 |
2022 |
2023 |
|
Private consumption |
1 616.9 |
5.0 |
9.1 |
4.2 |
|
Public consumption |
965.8 |
3.9 |
0.7 |
.. |
|
Gross fixed investments |
966.4 |
-0.3 |
1.7 |
1.3 |
|
Of which: Petroleum extraction and pipeline transportation |
178.4 |
-2.8 |
-7.2 |
0.1 |
|
Mainland Norway businesses |
353.5 |
2.2 |
6.2 |
2.1 |
|
Housing |
210.6 |
2.6 |
2.1 |
2.7 |
|
Public sector |
221.5 |
-3.1 |
1.1 |
.. |
|
Mainland Norway demand2 |
3 368.4 |
3.7 |
5.5 |
2.5 |
|
Exports |
1 722.7 |
4.8 |
4.9 |
5.0 |
|
Of which: Crude oil and natural gas |
861.7 |
2.8 |
1.8 |
6.5 |
|
Goods and services from the mainland |
718.6 |
5.0 |
6.7 |
4.9 |
|
Imports |
1 206.5 |
2.0 |
9.3 |
4.3 |
|
Gross domestic product |
4 144.1 |
3.9 |
3.5 |
2.8 |
|
Of which: Mainland Norway |
3 265.3 |
4.2 |
3.6 |
2.3 |
|
Other key figures: |
|
|
|
|
|
Employment |
|
1.2 |
3.0 |
0.8 |
|
Unemployment rate, LFS (level) |
|
4.4 |
3.3 |
3.2 |
|
Unemployment rate , registered (level) |
|
3.1 |
1.8 |
1.7 |
|
Annual wage growth |
|
3.5 |
3.7 |
.. |
|
Consumer price inflation (CPI) |
|
3.5 |
3.4 |
.. |
|
Underlying inflation (CPI-ATE) |
|
1.7 |
2.5 |
.. |
|
Crude oil price, NOK per barrel (current prices) |
|
609 |
885 |
.. |
|
Crude oil priceper barrel current prices) |
|
71 |
99 |
.. |
|
Gas price, NOK per. sm3 o.e. |
|
4.6 |
7.6 |
.. |
|
Three-month money market rate, pct. |
|
0.5 |
1.6 |
2.9 |
|
Import-weighted exchange rate, annual change in pct.4 |
|
-5.7 |
-2.5 |
-0.4 |
|
GDP growth on the part of Norway’s trading partners5 |
|
5.5 |
2.9 |
2.3 |
1 Provisional national account figures in current prices.
2 Excluding inventory changes.
3 Technically calculated using forward prices in April.
4 Negative number indicates Norwegian krone appreciation.
5 Norway’s 25 most important trading partners weighted by their respective shares of Norwegian goods exports other than oil and gas.
Sources: Statistics Norway, Intercontinental Exchange, Norges Bank, Nav, Reuters, Macrobond, Ministry of Petroleum and Energy and Ministry of Finance.
Table 2 Key figures for the fiscal budget and the Government Pension Fund. NOK billion
|
|
2020 |
2021 |
2022 |
|
Total revenues |
1 288.8 |
1 502.7 |
2 267.6 |
|
1 Revenues from petroleum activities |
134.4 |
312.2 |
960.0 |
|
1.1 Taxes |
35.4 |
91.8 |
544.4 |
|
1.2 Other petroleum revenues |
99.0 |
220.4 |
415.6 |
|
2 Non-petroleum revenues |
1 154.4 |
1 190.5 |
1 307.6 |
|
2.1 Mainland Norway taxes |
1 054.2 |
1 099.5 |
1 203.2 |
|
2.2 Other revenues |
100.2 |
91.0 |
104.4 |
|
Total expenditure |
1 552.5 |
1 584.2 |
1 638.0 |
|
1 Expenditure on petroleum activities |
27.6 |
24.7 |
27.0 |
|
2 Non-petroleum expenditure |
1 524.9 |
1 559.4 |
1 611.0 |
|
Fiscal budget surplus before transfers to the Government Pension Fund Global |
-263.7 |
-81.5 |
629.6 |
|
- Net cash flow from petroleum revenues |
106.8 |
287.5 |
933.0 |
|
= Non-oil budget surplus |
-370.5 |
-369.0 |
-303.4 |
|
+ Transfer from the Government Pension Fund Global |
417.4 |
390.1 |
303.4 |
|
= Fiscal budget surplus |
46.9 |
21.1 |
0.0 |
|
+ Net transfer to the Government Pension Fund Global |
-310.6 |
-102.6 |
629.6 |
|
+ Interest and dividends, etc. on the Government Pension Fund1 |
224.5 |
223.7 |
245.2 |
|
= Fiscal budget and Government Pension Fund consolidated surplus1 |
-39.2 |
142.2 |
874.8 |
|
Memo: |
|
|
|
|
Market value of Government Pension Fund Global2 |
10 086 |
10 907 |
12 340 |
|
Market value of Government Pension Fund2 |
10 355 |
11 199 |
12 673 |
|
National insurance retirement pension liabilities2,3 |
8 941 |
9 201 |
9 634 |
|
Structural non-oil fiscal deficit, NOK billion |
361.1 |
354.4 |
352.2 |
|
Percentage of the fund capital |
3.6 |
3.2 |
2.9 |
|
Percentage of Mainland Norway trend GDP |
11.4 |
10.8 |
10.3 |
|
Budget indicator, percentage points4 |
4.1 |
-0.6 |
-0.5 |
|
Real, underlying expenditure growth, pct. |
8.8 |
-1.3 |
0.8 |
1 Not including securities gains or losses.
2 At the beginning of the year.
3 Net present value of already accrued rights to future retirement pension payments under the national insurance scheme.
4 Positive numbers indicate an expansionary fiscal stance. The indicator does not take into consideration that different revenues and expenditure items may differ in their impact on economic activity.
Sources: Ministry of Finance and Statistics Norway