The government is tightening the use of oil money – E24

The case is being updated

On Wednesday at 10:00 am the government will release the state budget for next year, but already at 08:00 the most important key figures arrived.

The government proposes to spend 313.4 billion of the oil money next year, which corresponds to 3.0 percent of the Oil Fund.

This is an adjustment of NOK 404.3 billion this year, corresponding to 3.9 percent of the fund.

“Even though the deficit (use of oil money, journal.anm.) Will be reduced from 2020 to 2021, it is still a little more than NOK 61 billion more than in 2019, calculated in NOK 2021. In general, the Budgets for 2020 and 2021 will have a strong expansive effect on value creation on the Norwegian mainland in the future, “writes the Ministry of Finance.

Quicker return to action rule

In the government’s estimate at the end of May, this year’s use of oil money was estimated at NOK 425 billion, which corresponds to 4.2 percent of the value of the Oil Fund. By comparison, the first estimate from October last year was NOK 244 billion.

The rule of thumb dictates that use over time should be limited to three percent of the fund’s value, but allows exceedances in bad times as long as it is stricter in good times.

In September, Norges Bank estimated oil money use of 3.8 percent from the Oil Fund this year and 3.5 percent next. Also in the next two years, the central bank thought spending would be above the golden rule.

Economists are also surprised that the government manages to toughen up enough to follow the rule of thumb next year.

– If you beat this at the Storting, you will ensure that interest rates stay low for a long time, and perhaps longer than Norges Bank envisioned in the previous report, says Chief Economist Elisabeth Holvik at Sparebank 1 Gruppen to E24 .

Norges Bank has announced a record zero interest rate through the second half of 2022.

A couple of weeks ago, it became clear that the crown bill was lower than expected, and the sum of the financial measures was adjusted downward by more than NOK 42 billion to NOK 126.3 billion. For next year, the government revealed to VG earlier in the week that NOK 25 billion has been set aside for corona measures.

Adjusted by the crown, still gives gas

The budget boost falls to minus 2.9 percent from 4.5 percent in 2019, which means the government is shifting from heavy gas to slowing down.

The momentum measures the use of oil money against the economic growth of the mainland economy in Norway. Therefore, the state budget constitutes a slightly smaller part of the Norwegian economy.

The slowdown is occurring “primarily as a result of the completion of most of the comprehensive and temporary corona measures in 2020.” Excluding extraordinary measures in 2020, the crown-adjusted budget boost is more than 1.0% as a percentage of value creation in 2021.

“The corona pandemic has caused the deepest setback in the Norwegian economy in the post-war period. In recent months, activity has recovered, but there is still great uncertainty about future developments,” the ministry writes.

However, it is emphasized that even if the recovery has been faster than expected this spring, the level of activity will likely be lower than normal for a long time.

These are the numbers:

• Oil-adjusted structural budget deficit, measured in NOK 2021 (use of oil money): 313.4 billion in 2021, 404.3 billion in 2020, 252.0 billion in 2019
• Use of oil money as part of the Oil Fund: 3.0% in 2021, 3.9% in 2020 and 2.9% in 2019
• Budget boost: −2.9% in 2021, plus 4.5% in 2020, plus 0.4% in 2019, adjusted to crown measurements, the budget boost for next year is plus 1.0%

Key figures of the National Budget 2021