A budget to promote an efficient use of resources

The 2015 Fiscal Budget is a further step towards a change of policy direction in Norway. The Government will promote growth in the Norwegian economy through targeted tax reductions, high priority on infrastructure and emphasis on other measures to stimulate productivity and competitiveness.

The Norwegian mainland (or non-oil) economy is forecast to grow at around 2 per cent both this year and in 2015. An expected decline in petroleum investment is expected to weigh on growth next year. The labour market remains strong, with an unemployment rate of around 3½ per cent.

“Lower demand from the petroleum sector poses a challenge to the mainland economy. We must ensure that our economy is able to adapt to changing circumstances. The government aims to foster productivity growth and implement measures to increase the economy’s growth potential,” said Minister of Finance Siv Jensen.

The government proposes a Fiscal Budget for 2015 with a structural non-oil deficit of NOK 164 billion, equivalent to 3.0 per cent of the value of the Government Pension Fund Global.

“The government will make the tax system simpler and more conducive to growth. Lower tax on income strengthens incentives to work. A reduction in the net wealth tax will stimulate saving and may encourage entrepreneurship,” said Finance Minister Siv Jensen.

 
Fiscal Policy
The Government is committed to the 2001 Fiscal Policy Guidelines. The guidelines stipulate a gradual and sustainable use of petroleum revenues in line with the expected real return on the Government Pension Fund Global, estimated at 4 per cent.

The main features of fiscal policy in 2015:

• The non-oil structural deficit, which is a measure of the spending of petroleum revenues, is estimated to be NOK 164 billion. This is equivalent to 3.0 per cent of the estimated value of the Government Pension Fund Global at the beginning of 2015.
  
  
• The structural deficit as a share of trend GDP for Mainland-Norway increases by half a percentage point, which implies that the budget increases domestic demand.
  
  
• A further reduction in paid taxes and excises from 2014 to 2015 of about NOK 6.9 billion and NOK 8.3 billion on an accrual basis.
  
  
• The real underlying growth in budget expenditure from 2014 to 2015 is estimated to be 2.3 per cent. In nominal terms expenditure is estimated to increase by 5.3 per cent.

Monetary policy
The long term role of monetary policy is to provide the economy with a nominal anchor. In the short and medium term monetary policy is to balance the need for low and stable inflation against the outlook for production and employment. The operational target is defined as an annual consumer price inflation of close to 2.5 per cent over time. The central bank (Norges Bank) has held its key policy rate at 1.5 per cent since March 2012.

The Government Pension Fund
The purpose of the Government Pension Fund is to facilitate government saving to finance rising public pension expenditures and support long term considerations in the spending of government petroleum revenues. All government petroleum revenues are paid into the Fund. The Fund's only expense is a transfer back to the budget to cover the non-oil budget deficit, in line with the fiscal guidelines.

The capital of the Fund is invested abroad in international equities, fixed-income securities and real estate, within guidelines set by the Ministry of Finance. The investment strategy is to achieve high financial returns subject to a moderate level of risk. The market value of the Government Pension Fund Global is estimated to be NOK 5 545 billion at the end of 2014, and NOK 6 015 billion at the end of 2015.

 

 Key figures for the Norwegian economy¹

	2013 NOK billion2 3	2013	2014	2015
Private consumption	1234.5	2.1	2.1	2.7
Public consumption	658.1	1.8	2.1	2.2
Gross fixed investments	681.9	8.4	1.0	-0.9
Petroleum	208.3	17.1	0.0	-8.0
Business sector. Mainland Norway	185.6	0.2	0.1	1.2
Exports	1170.8	-3.3	2.2	2.2
Crude oil and natural gas	570.4	-7.7	0.9	0.6
Traditional goods	322.1	0.4	3.1	3.6
Imports	847.9	2.9	2.3	2.5
Traditional goods	508.1	2.5	1.4	3.6
Gross domestic product	3011.4	0.6	1.8	1.6
Mainland Norway	2314.0	2.0	2.2	2.0
Consumer price inflation (CPI)		2.1	2.1	2.1
Underlying inflation (CPI-ATE)		1.6	2.4	2.1
Wage growth		3.9	3.3	3¼
Employment growth		1.2	0.9	0.8
Unemployment rate (LFS)		3.5	3.4	3.6
Crude oil per barrel. NOK3		639	656	650
Current account balance (pct. of GDP)		11.1	11.6	11.7

1) Percentage volume change from previous year.
2) Preliminary national account figures.
3) Current prices.

Sources: Statistics Norway and Ministry of Finance.

 
 
Key figures for the Fiscal Budget and Government Pension Fund. NOK billion

	2013	2014	2015
1. Fiscal Budget
Total revenues	1291.8	1 272.2	1 328.9
Revenues from petroleum activities	378.7	335.2	342.0
Revenues excl. petroleum activities	913.1	937.1	987.0
Total expenditures	1 063.1	1 124.8	1 199.2
Expenditures on petroleum activities	33.6	38.0	38.0
Expenditures excl. petroleum activities	1 029.5	1 086.8	1 161.2
Fiscal budget surplus before transfers to the Pension Fund Global	228.7	147.4	129.7
Net revenues from petroleum activities	345.2	297.2	304.0
=  Non-oil budget surplus	-116.5	-149.8	-174.2
+  Transfers from the Pension Fund Global	117.3	149.8	174.2
=  Fiscal Budget surplus	0.9	0.0	0.0
2. Government Pension Fund
Net transfer to the Pension Fund Global	227.8	147.4	129.7
+  Interest and dividends on the Pension Fund	131.1	161.7	178.3
=  Surplus in the Pension Fund	358.9	309.1	308.0
3. Fiscal Budget and Government Pension Fund consolidated surplus	359.8	309.1	308.0

Sources: Statistics Norway and Ministry of Finance.

 

  

General government financial balance. NOK million
 

	2013	2014	2015
A. Central government financial balance	378 432	334 955	333 889
Fiscal Budget surplus and Surplus in Government Pension Fund	359 769	309 100	308 030
Non-oil budget surplus	-116 454	-149 753	-174 225
Net revenues from petroleum activities	345 151	297 153	303 955
Interest and dividends on the Pension Fund	131 072	161 700	178 300
Surplus in other central government and social security accounts.	7 207	3 736	4 12 2
Definitional differences between Fiscal Budget and national accounts1	11 456	22 119	21 736
B. Local government financial balance	-29 173	-29 063	-27 522
C. General government financial balance (A+B)	349 259	305 892	306 367
In per cent of GDP	11.6	9.8	9.5

1) Includes central government accrued, but not recorded taxes. Direct investments in state enterprises, including government petroleum activities, is defined as financial investments in the national accounts.

Sources: Statistics Norway and Ministry of Finance.

Read more:
  

• Press release 47/2014:Government commissions to consider how to apply the fiscal rule and the need for multi-year budgeting
• English version: Main features of the tax programme for 2015
• English version: The Norwegian tax system – main features and developments: Chapter 2 of the bill and draft resolution on taxes