A budget to help us safely reclaim ordinary life

‘The time ahead will be difficult. A great many Norwegians are without work, most of them because they were temporarily laid off. Many more are wondering if their job or their life’s work will still be there when the crisis ends. That is why we are proposing a number of measures to develop skills and encourage green restructuring for the future.  We will create more jobs and integrate even more people into working life,’ said Prime Minister Erna Solberg.

The whole world is confronting a challenge that is without parallel in modern time. The Covid-19 outbreak is a serious threat to life and health. Extensive infection control measures at home and abroad are causing a sharp decline in Norwegian economic growth. Initiatives contained in the Revised National Budget will build on the powerful packages of measures already introduced to help people and companies through this demanding period.

‘Together, we will take back our everyday lives in a safe manner. With this budget proposal, we seek to strengthen activity all over the country and to promote green restructuring and business growth. We are also prioritising hospitals and services for vulnerable children. Young and old alike will feel secure and receive the help they need,’ said Minister of Finance Jan Tore Sanner (Conservative Party).

The Government’s proposed 2020 revised budget calls for the use of almost NOK 420 billion in petroleum revenues. That represents 4.2 per cent of the capital in the Government Pension Fund Global. The fiscal impulse is estimated at 5.1 per cent of mainland Norway’s trend GDP.

‘Increased spending has been a necessity in the current situation – both to avoid an even sharper downturn and to help healthy companies through the crisis so they can create jobs and growth when normal circumstances return,’ the Minister of Finance said.

Norway’s underlying financial condition is stronger than that of many other countries. Before the crisis, Norway had a high rate of employment, low unemployment, high productivity, robust banks and a well-functioning economy. The Norwegian business sector is flexible and enjoys a high degree of trust in society.

‘As we carefully begin opening up and relaxing infection control rules, we will have to adjust the existing measures and eventually introduce new ones to get the economy up to speed and people back to work. We must also keep in mind that the challenges we faced before the coronavirus crisis have not disappeared. Our solutions going forward must incorporate long-term perspectives,’ Mr Sanner said.

Further review of this year’s revised budget will be different from usual.

‘Back in March and April, the Storting handled four extensive crisis packages with major implications for the fiscal budget,’ Mr Sanner said. ‘The Government has also given notice, in coordination with the Storting, of a separate proposition in late May/early June with additional measures to lead us out of the coronavirus crisis.’

The Government plans to compensate municipalities and counties for extra costs and revenue shortfalls linked to the virus outbreak, thereby enabling local governments to maintain their activities.

Table 1 Key figures for the Norwegian economy. Percentage volume change from the previous year, unless otherwise stated.

	Billion NOK1
	2019	2019	2020	2021
Gross domestic product	3537.6	1.2	-2.0
Of which: Mainland Norway	3039.0	2.3	-4.0	4–7
Private consumption	1593.8	1.7	-8.5
Public consumption	866.2	1.7	3.2
Gross fixed investment
Of which: Public sector	211.3	6.9	2.7
Other key figures:
Employment		1.7	-1.0
Unemployment rate, LFS (level)		3.7	5.1
Unemployment rate, registered (level)2		2.2	5.9
Annual wage growth		3.5	1.5
Consumer price index (CPI)		2.2	1.0
Crude oil price, NOK per barrel (current prices)		564	331
Crude oil price, USD per barrel (current prices)		64.1	33.2
Household savings rate (level)3		7.6	15.6
GDP growth among trading partners4		1.9	-6.0
Three-month money market rate, per cent5		1.6	0.9
Import-weighted NOK exchange rate (yearly change, per cent)6		2.9	10.1

¹ Preliminary national accounts figures, current prices.

² Measured as percentage of the labour force in the Labour Force Survey (LFS).

³ Includes saving in voluntary organisations.

⁴ Norway’s 25 most important trading partners weighted by respective shares of Norwegian exports from mainland Norway.

⁵ Calculation method based on forward prices in March.

⁶ Positive figure indicates NOK depreciation.

Sources: Statistics Norway, OECD, national sources, Norges Bank, Norwegian Labour and Welfare Administration, Reuters and the Ministry of Finance.

Table 2 Key figures for the Fiscal Budget and Government Pension Fund. Billion NOK

	2018	2019	2020
Total revenues	1350.6	1407.4	1235.0
1 Revenues from petroleum activities	273.5	283.2	125.8
1.1 Taxes and fees	117.3	140.4	39.8
1.2 Other petroleum revenues	156.2	142.9	86.0
2 Revenues excl. petroleum activities	1077.1	1124.2	1109.2
2.1 Taxes and fees from mainland Norway	986.4	1030.9	1011.7
2.2 Other revenues	90.6	93.3	97.5
Total expenditures	1318.1	1378.1	1616.8
1 Expenditures on petroleum activities	22.6	26.3	28.0
2 Expenditures excl. petroleum activities	1295.6	1351.8	1588.8
Fiscal budget surplus before transfers to/from Government Pension Fund Global	32.4	29.3	-381.8
- Net cash flow from petroleum activities	251.0	256.9	97.8
= Non-oil budget surplus	-218.5	-227.6	-479.6
+ Transfers from Government Pension Fund Global	225.5	228.6	479.6
= Fiscal budget surplus	7.0	0.9	0.0
+ Net transfer to Government Pension Fund Global	25.4	28.4	-381.8
+ Interest, dividends etc. on Government Pension Fund1	225.0	247.5	258.0
= Fiscal budget and Government Pension Fund consolidated surplus1	257.4	276.7	-123.8
Memo:
Market value of Government Pension Fund Global2	8 484	8 243	10 086
Market value of Government Pension Fund2	8 724	8 483	10 355
National Insurance Scheme retirement pension obligations 2,3	8 407	8 722	9 088
Structural non-oil budget deficit, billion NOK	225.1	245.2	419.6
Per cent of capital in Government Pension Fund Global	2.7	3.0	4.2
Per cent of trend GDP for mainland Norway	7.6	8.0	13.1
Fiscal impulse, percentage points4	-0.4	0.4	5.1
Real, underlying expenditure growth, per cent	0.7	1.7	12.1

¹ Not including exchange rate gains or losses.

² At start of year.

³ Present value of future retirement pension rights already earned in the National Insurance Scheme.

⁴ A positive figure indicates an expansive budget effect. This indicator does not take into account the fact that different income and expenditure items may affect economic activity in different ways.

Sources: Ministry of Finance and Statistics Norway.