Norway uses oil fund to boost economy

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The government plans to return to orthodoxy from 2021, with growth rebounding to 4.4%. The economy is much less hard hit by the coronavirus than expected.

Let go of ballast, but not too much. For the Norwegian government, the 2021 budget proposal presented on Wednesday should make it possible to revive the economy, although less hard hit by the coronavirus than expected, without letting spending slip too much.

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Next year, the Conservative Finance Minister, Jan Tore Sanner, has planned for this purpose to draw 313 billion crowns (28 billion euros) from the gigantic sovereign wealth fund fed by oil and gas resources extracted from the off the coast. This is 8 billion euros less than the exceptional amount planned for 2020. Because of the coronavirus, the government has authorized itself – as it can do in times of economic crisis – to use more than the usual threshold this year 3% of the fund (in this case 3.9%).

Back in the nails from 2021

A return to the nails is anticipated by the government from 2021, at 3%. What surprise several economists. In charge of the fund, “the Central Bank was counting on a levy of 3.5% next year” , wonders Elisabeth Holvik, chief economist at Sparebank 1.

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That said, the right-wing government, a minority in Parliament, will first have to negotiate support for its budget with right-wing and center-right populists. “His project gives him leeway” with a view to concessions that risk increasing the rating, notes Ola Honningdal Grytten, professor of economics at the Norwegian Business School.

The economic situation has also deteriorated less than feared at the height of the crisis. The government now expects a decline of 3.1% of GDP this year, followed by an increase of 4.4% from 2021. At the same time, the unemployment rate will drop from 4.7% to 4.4% .

“The activity has resumed, people are spending more, real estate prices are rising and a barrel of crude has stabilized around $ 40 ,” said the Minister of Finance. In September, the expected addition for successive public aid plans was revised downward to 126 billion (11.5 billion euros).

But “the crisis is not over,” warns Jan Tore Sanner. If the health situation is much more reassuring than in France, the contamination is not entirely under control throughout the country. So far, the human toll in Norway – which has imposed temporary strict containment – stands at 275 dead, the lowest Nordic death rate after Iceland.

Reassuring health situation

“Part of the economy will continue to suffer next year ,  insists Øystein Dørum, at the Confederation of Enterprises (NHO). Many of them have seen their overseas opportunities melt away with the pandemic. With its draft budget, the government hopes to contribute to a rebound through investments in research, the fight against global warming and transport.

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