Norway’s new government is tapping more oil revenue than previously estimated this year to support a slowing expansion in Scandinavia’s richest nation.
The government will use a record 140.9 billion kroner ($24 billion), of its oil revenue to plug budget deficits, up from 139 billion kroner estimated in November, according to a budget handed out in Oslo today. That’s equal to 2.8 percent of the wealth fund, down from a 2.9 percent estimate in November.
“The figures are very much close to normal, just adjusted a little bit,” Finance Minister Siv Jensen said in an interview after a press conference in Oslo. “The forecast for the Norwegian economy is quite good for this year and for next year, so we made just minor adjustments” to spending, she said.
The government cut a forecast from November, estimating that mainland economic growth, which excludes oil and gas output, will be 1.9 percent this year and 2.2 percent next year. Unemployment will be 3.7 percent this year and rise to 3.8 percent next year, according to the budget.
The expansion in western Europe’s largest oil exporter has abated as offshore investment slow and record household debt curbs consumer spending. That has been partly offset by a weakening krone, which lost its allure as a haven from the European debt crisis and has slid about 7 percent against the euro over the past year, helping exporters.
While growth is forecast to slow for a second year, recent data have signaled a recovery may be mounting. A report showed retail sales unexpectedly rose 1 percent in March, the biggest gain since May 2013. Registered unemployment fell to 2.8 percent in April, down from 3 percent at the start of the year.
Norwegian governments have kept oil money spending below a rule limiting the use of oil money to 4 percent of the fund since 2009. This year’s proposed use will be the lowest proportionally since 2007. As the fund grows, the fiscal rule allows for more and more oil money to be funneled into the budget. The government today estimated the fund would reach 7.45 trillion kroner by 2020. It has grown fivefold since 2005.
The country places most of its oil revenue into the fund, which invests abroad to avoid stoking inflation. The Government Pension Fund Global is the world’s largest wealth fund.
Norges Bank left its main rate at 1.5 percent last week to support as recovery after successfully weakening the krone.
While budget is more expansionary than Norges Bank has forecast, the difference is “too small to have any impact on its view on growth and rates,” said Erik Bruce, an economist at Nordea Bank AB, in a note.
The minority government will need to negotiate with its smaller support parties in parliament to pass the budget.
Terje Breivik, financial spokesman for the Liberal Party, which supports the government in parliament, said in an interview on TV2 he was surprised how “passive” the budget was in important areas such as education and climate.
(Earlier version of this story corrected unemployment estimates in fourth paragraph.)