After Beating the Oil Bust, Norway's Finance Chief Faces Voters

  • Progress Party vows to raise infrastructure spending
  • Finance Minister Siv Jensen wants to cut taxes further

Siv Jensen on June 29.

Photographer: Fredrik Bjerknes/Bloomberg

The Norwegian finance minister is unapologetic about unleashing a record amount of fiscal stimulus over the past three years.

That’s what has saved the economy from an existential crisis that was far worse than during the global financial meltdown a decade ago, Siv Jensen, who’s also leader of the Progress Party, said in an interview at her office in Oslo Thursday. The 48-year-old last year became the first finance chief in Norwegian history to start withdrawals from the $960 billion wealth fund, built over the past two decades to save oil revenue for future generations.

Now she’s promising more of the same, more spending on infrastructure and further tax cuts, as she faces the voters in September’s general election. With her coalition trailing in the polls, she says the opposition Labor Party’s promise to raise taxes is the wrong prescription at a time when the recovery is still fragile and Norway still has far to go in reducing its dependence on oil.

“It’s not helpful to hand Norwegian businesses a bigger tax bill when they are trying to strengthen their competitiveness,” Jensen said. “That’s quite obvious.”

Read more on central bank policy

The question is whether the voters will agree. Jensen’s Progress Party, her larger coalition partner, the Conservatives, and support parties have backing of 44.3 percent compared with 48.1 percent for the Labor-led opposition, according to averages from pollofpolls.no. Labor has been hammering the government for spending too much of the nation’s oil wealth, while also promising almost the same amounts in its shadow budgets.

But Jensen could now be feeling the wind at her back. Unemployment has slid since hitting a peak last year and businesses are becoming more optimistic after a long period of near stagnant growth. The nation’s central bank has signaled it’s done with cutting interest rates and the booming housing market is showing signs of cooling after the government pushed through measures to damp lending.

“We have managed the economy safely during a demanding period,” Jensen said. “Our policies and actions work.”

Read more on wealth fund withdrawals here

Moody’s Investors Service said in a report on Monday that the economy has “proven relatively resilient” to the lower oil prices thanks to “longstanding preparations and the inherent flexibility of its economic policy structure.”

In her campaign, Jensen is focusing on her party’s core issues such capping immigration and further deregulation. Speaking to her core members, she last month even pledged to halt asylum immigration to Norway, which may be hard to do given international obligations. 

Started as an anti-tax movement in the 1970s, the Progress Party joined the government for the first time in 2013 after being a long-time outsider in Norwegian politics. While in power as part of a minority coalition, it has had to compromise on many of its key issues. It also oversaw a stream of refugees pouring into the Nordic nation.

The massive stimulus over the past years, equal to more than 7 percent of gross domestic product both this year and last, has deepened the state’s grip on the economy, something of an anathema to Jensen’s party. The public sector has ballooned to one of the largest in the world, ranking highest on public spending as share of the economy and employing more than one third of the workforce. 

Jensen concedes that Norway “will probably always have a high proportion of workers employed by the state” and that “it’s a big ship that won’t easily be turned.”

State Ownership

Still, by cutting wealth taxes and corporate taxes, Jensen said that “over time” this will yield results.

Adding to the sheer size of the country’s public sector, the state also holds large stakes in companies listed on the Oslo Stock Exchange, holding almost 30 percent of the shares on the bourse through firms such as Statoil ASA, DNB ASA and Telenor ASA

Slimming down on state ownership was an ambition when the government took power in 2013, but so far little has changed. The government has sold some of its stakes, including a holding in fish farmer Cermaq ASA and it also listed real estate company Entra ASA.

“It’s not a problem that the state is invested in companies as long as the ownership is professional and is kept away from politicians,” Jensen said. 

With the Progress Party now part of the establishment, Norway is almost a rarity in Europe in heading into an election without an outsider seeking to storm the ramparts. The country, of course, has been able to hold off economic distress thanks to its massive oil wealth. 

But it’s also because politicians in Norway have their ear close to the ground and are willing to debate controversial topics, according to Jensen.

“In this country people can meet their politicians in the streets,” she said. “I see this as a strength.”

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE