A budget to promote recovery and inclusion

"Reopening of the society has started. Vaccination is well underway and within months most of the adult population will be offered vaccines. We have been in this crisis together and together we shall leave it behind. With the Revised Budget we strengthen the effort to create more jobs and include more people in the labour market", says prime minister Erna Solberg (Conservative party).

As containment measures are lifted, economic measures must be phased out to avoid that they discourage activity and restructuring. Yet there will be industries that need time to recover, restructure, and reemploy. Therefore, the government suggests that some support measures be continued – although a few of them slightly adjusted to promote activity.

"We emphasize that temporary measures indeed are meant to be temporary. When containment measures are lifted, economic compensation needs to be phased out. We will promote activity and restructuring in the economy. In this way, we put more people to work", says finance minister Jan Tore Sanner (Conservative party).

In the budget, the government also suggests new measures aimed at mental health, vulnerable groups, and to make up for lost progress in school and childcare.

"So far in the pandemic, Norway’s performance compares well internationally. However, this is not over yet. Too many are without job and the extent of long-term effects are still unknown. We must avoid that the crisis takes the heaviest toll on the most vulnerable. They will get better help. This consideration underlies our priorities", says the finance minister.

Throughout the pandemic, the government’s priority has been to enable the health sector and local government to handle the pandemic and contain the virus effectively. The proposed Revised Budget permits these sectors to continue this effort without compromising with other crucial service delivery to the public.

Measures in the Revised Budget add to an already expansionary budget. This will pave the way for new growth, a green shift, and activity and employment throughout the country.

"To meet the crisis with forceful economic measures has been crucial. Increasing the petroleum revenue spending to this end is also in line with the fiscal rule. Grants and planned measures now summarize to 229 billion NOK. Still, to maintain fiscal sustainability and support the economy’s growth ability, post-crisis spending must be brought down. The IMF recently concluded that the government so far had handled the economic consequences of the crisis well", says the finance minister.

The government’s strategy to get the Norwegian economy out of the crisis builds on the following elements:

1. Put people to work. Unemployment must come down and more people needs to be included in the labour market. We must avoid that those who lost their jobs during the crisis become long-term unemployed. Particular attention is required for industries such as tourism, cafes, restaurants, night life, and transport. Efforts will be devoted towards low-skilled, the young generations, and immigrants.
2. Foster new growth in private business. We will support new growth, restructuring and innovation, and promote job creation throughout the country.
3. Exit this crisis together. We will prioritize our efforts towards those on which the crisis has been particularly hard. That implies catering the needs for lonely elderly, children victims to violence and abuse, and children and youth with mental health issues. In addition, we will push for integration and make up for lost education.
4. Build competence. We will improve completion rates in upper secondary education and facilitate that the labour force acquires the skills of tomorrow. These efforts will include those left without a job due to the crisis.
5. Promote a green shift. We will support business in creating green jobs and a more sustainable future on the way out of the crisis.
6. Strengthen international cooperation. Norway’s international engagement will continue, including in the areas of vaccines, trade, development, climate, and emergency preparedness. Tomorrow's challenges need coordinated solutions.

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

	NOK billion1
	2020	2020	2021
Private consumption	1 486.0	-7.6	4.7
Public consumption	909.6	1.7	4.3
Gross fixed investments	906.9	-3.9	0.2
Of which:
Petroleum extraction and pipeline transportation	179.7	-4.9	-5.4
Businesses in mainland Norway	312.9	-6.3	0.0
Housing	190.8	-4.0	6.4
Public sector	218.1	-0.3	-0.8
Mainland Norway demand2	3 117.4	-4.2	3.9
Exports	1 102.9	-0.9	4.1
Of which:
Crude oil and natural gas	349.5	9.5	3.3
Goods, except oil and gas	407.6	-2.3	3.7
Services, except oil, gas and shipping	226.9	-17.4	10.8
Imports	1 123.0	-12,2	3.0
Gross domestic product	3 408.6	-0.8	3.7
Of which: Mainland Norway	3 042.3	-2.5	3.7
Other key figures:
Employment, persons		-1.3	0.5
Unemployment rate, LFS (level)		4.6	4.4
Unemployment rate, registered (level)		5.0	3.5
Annual wage growth		3.1	2.4
Consumer price inflation (CPI)		1.3	2.8
Underlying inflation (CPI-ATE)		3.0	2.0
Crude oil prices, NOK per barrel (current prices)		407	557
Crude oil prices, USD per barrel (current prices)		43	66
Three-month money market rate, pct.3		0.7	0.6
Import-weighted exchange rate (I-44), annual changes in pct.4		6.3	-5.4
GDP growth on the part of Norway’s trading partners5		-4.3	4.4

 ¹ Provisional national account figures in current prices.

² Excluding inventory changes.

³ Technically calculated using forward prices in March.

⁴ Positive number indicates Norwegian krone depreciation.

⁵ Norway’s 25 most important trading partners weighted by their respective shares of Norwegian goods exports, except oil and gas.

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

Table 2: Key figures for the fiscal budget and the Government Pension Fund. NOK billion

	2019	2020	2021
Total revenues	1 407.4	1 288.8	1 326.1
1 Revenues from petroleum activities	283.2	134.4	180.0
1.1 Taxes	140.4	35.4	53.9
1.2 Other petroleum revenues	142.9	99.0	126.1
2 Non-petroleum revenues	1 124.2	1 154.4	1 146.1
2.1 Mainland Norway taxes	1 030.9	1 054.2	1 065.2
2.2 Other revenues	93.3	100.2	80.8
Total expenditure	1 378.1	1 552.5	1 593.2
1 Expenditure on petroleum activities	26.3	27.6	26.0
2 Non-petroleum expenditure	1 351.8	1 524.9	1 567.2
Fiscal budget surplus before transfers to the Government Pension Fund Global	29.3	-263.7	-267.1
- Net cash flow from petroleum revenues	256.9	106.8	154.0
= Non-oil budget surplus	-227.6	-370.5	-421.1
+ Transfer from the Government Pension Fund Global	228.6	417.4	421.1
= Fiscal budget surplus	0.9	46.9	0.0
+ Net transfer to the Government Pension Fund Global	28.4	-310.6	-267.1
+ Interest and dividends, etc., on the Government Pension Fund1	247.5	224.5	209.3
=   Fiscal budget and Government Pension Fund consolidated surplus1	276.7	-39.2	-57.8
Memo:
Market value of the Government Pension Fund Global2	8 243	10 086	10 907
Market value of the Government Pension Fund2	8 483	10 355	11 199
National insurance retirement pension liabilities2,3	8 722	8 941	9 201
Structural non-oil fiscal deficit, NOK billion	238.6	369.3	402.6
Percentage of the fund capital	2.9	3.7	3.7
Percentage of mainland Norway trend GDP	7.8	11.7	12.3
Budget indicator, percentage points4	0.4	3.9	0.6
Real underlying expenditure growth, pct.	1.7	8.6	1.6

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.