Press Release
Ministry of Finance

10. may 1995

Revised National Budget 1995:

A tight fiscal policy stance in 1995

In the Revised National Budget, the Government confirms the tight fiscal stance in 1995 introduced in the Final Budget Bill - including the tight control of expenditures through the fiscal year. The underlying real change in expenditures from 1994 to1995 is about zero.

Due to a more favourable economic development resulting in higher oil and tax revenues, the Fiscal Budget is expected to show a defict of NOK 6 billion in 1995 compared with NOK 11 billion in the Final Budget Bill. In 1993 the deficit was NOK 44 billion.

The contractionary effect of the Fiscal Budget in 1995 is now calculated to 3/4 per cent of Mainland GDP compared with 1 3/4 per cent in 1994.

From deficit to surplus

Fiscal policy has been used actively to stabilise employment during the downturn in the Norwegian economy in the period 1989-93. With recovery firmly established, it is the aim of the Government to further reduce Fiscal Budget deficit and turn it into a surplus as soon as possible. This is important in order to maintain room for manoeuvre in fiscal policy and to meet long-term challenges of declining oil revenues and ageing population.

The Fiscal Budget is expected to show a surplus in 1996 implying a first net allocation to the Petroleum Fund since it was established in 1990.

The Government is also aiming at pursuing a fiscal policy which is sustainable in the long term. The General Government Budget now shows a surplus of 1,5 per cent of GDP in 1995 compared with a deficit of 0,2 per cent in 1994. These figures can be compared with the Maastricht criterion of a deficit of 3 per cent. The gross debt was 48 per cent of GDP at the end of 1994, which is well below the Maastricht criterion of 60 per cent.

The guidelines for monetary policy are unchanged. Within the framework of low price and wage inflation, the operational target for the Bank of Norway is to maintain a stable exchange rate against European currencies.

With the no-vote to join the EU it is all the more important to consolidate the gains in price and wage inflation compared to our trading partners. Income policies will continue to play a crucial role in this respect and to secure further employment growth.

According to the Uruguay round agreement in the GATT, quantitative import restrictions will be replaced by customs duties. The Government intends to use this opportunity to increase competition in the agricultural sector and the agro-food industry and thereby to secure low prices for the consumers.

Key figures for the Norwegian economy

The growth of the Norwegian economy is estimated to be somewhat stronger than projected in the Final Budget Bill. Whereas growth in 1994 was mainly fuelled by private consumption and exports, investments in enterprises in the Mainland economy and exports are expected to be the main driving forces behind the growth in 1995.

Mainland GDP is estimated to grow by 3 per cent in 1995 compared to an estimate of

2 1/4 per cent in the Final Budget Bill. For 1996 the Mainland economy is expected to grow by 2,5 per cent. The GDP growth for the whole economy, including petroleum and shipping, is estimated at 5 per cent in 1995 and 3,5 per cent in 1996. This is higher than projected in the Final Budget Bill, mainly due to increased petroleum production .

Employment is estimated to increase by 1,5 per cent or 30 000 persons this year. The employment growth is expected to slow down to about 1 per cent in 1996. For 1995 unemployment is expected to fall to 5 per cent, which is 0,4 percentage point below the average for 1994.

The current account surplus is estimated at about NOK 36 billion in 1995, rising to about NOK 65 billion in 1996. The projected increase in the current account surplus is primarily based on an expected rise in the export value of oil and gas and of traditional exports. The projections are based on an oil price of NOK 115 per barrel.

The growth in consumer prices increased somewhat in January, partly reflecting increases in indirect taxes. Annual growth is estimated at 2,5 per cent. The underlying inflation growth, excluding the effects of increased indirect taxation, is lower and the inflation rate is therefore expected to be lower in 1996 than in 1995.

The Revised National Budget also includes medium-term projections for 1997-1999.

Average growth for the Mainland economy is estimated to 2 1/4 per cent. Employment growth is estimated at around 1 per cent per year.

Key projections, available at the information office, Ministry of Finance,
tel: (47) 22 34 10 05, fax: (47) 22 34 95 10

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Lagt inn 27 juli 1995 av Statens forvaltningstjeneste, ODIN-redaksjonen