A budget to promote employment, welfare and security

The restructuring of the economy must continue in order for us to reach the climate goals and further diversify the economy to promote growth.

"To support the economy’s growth potential, we maintain fiscal responsibility. The fiscal budget is well adapted to the economic situation and will make Norway stronger and more secure", says the Minister of Finance.

Given favourable economic conditions, a tighter fiscal stance now allows the majority of new jobs to be created within the private sector. The 2019 fiscal budget has a neutral impact on the Norwegian economy. Spending of oil revenue amounts to 2.7 per cent of the Government Pension Fund Global. This is well in line with the fiscal rule, which says that transfers from the GPFG to the central government budget shall, over time, follow the expected real return on the fund, estimated at 3 per cent.

The government maintains its growth-supporting policies by cutting taxes and duties also in the 2019 budget. Prioritized areas continue to be knowledge, transport and communication, health, and an efficient provision of services at the local level.

"By cutting taxes and duties, we provide businesses and families with more economic leeway. In addition, lower taxes encourage job creation and make work more attractive. We are constructing roads and railways at a rapid pace, and we continue to promote research, innovation and build competence. We make the everyday life easier, and, at the same time, improve competiveness and promote a shift towards greener, smarter and more innovative business activities", says the Minister of Finance.

The political platform for this government signalled measures to get people back into the workforce and to encourage integration into the Norwegian society. In the Fiscal Budget, spending on inclusion and integration is increased.

"Companies are now hiring, and we should use the good times to include more people in the work force. At the same time, we must provide targeted support to families who struggle financially. The government will increase housing support and provide a larger number of low-income families with free part-time access to day care", says the Minister of Finance.

The government is also implementing measures to make Norway more secure.

Long-term plans for Norwegian armed forces are supported by large investments and higher ambitions for the army and the home guard. More resources are also allocated to strengthen the Norwegian police security service and the police force.

A more secure Norway is also about efficient provision of social welfare. That is why we invest in hospitals, more effective treatment, and in the quality of elderly care.

Our security is also shaped by circumstances outside the Norwegian border.

"We propose an elevated level of targeted foreign aid, including to the fight against marine litter. In this way, Norway contributes to development and stability globally, and provides support for common solutions to global challenges", says the Minister of Finance.

Main features of the Government’s fiscal policy in 2019:

• Petroleum revenues spending, as measured by the structural non-oil deficit, is estimated at NOK 231.2 billion, equivalent to 7.5 per cent of GDP for mainland Norway. The fiscal impulse, as measured by the change in the structural non-oil deficit in per cent of mainland GDP, is 0.0 percentage points.
• The non-oil deficit is projected at NOK 232.5 billion. This deficit is fully financed through a transfer from the Government Pension Fund Global.
• Net cash flow to the Fund from petroleum activities is estimated at NOK 285.8 billion.
• Petroleum revenues spending in 2019 corresponds to 2.7 per cent of the estimated capital in the Government Pension Fund Global at the beginning of 2019. This is below the expected real return of the Fund, estimated at 3 per cent.
• The real, underlying growth in fiscal budget expenditure from 2018 to 2019 is estimated at 1.3 per cent, well below projected real GDP growth in the mainland economy. In nominal terms, expenditure is projected to grow by 4.0 per cent.
• The consolidated surplus of the Fiscal Budget and the Government Pension Fund, including NOK 225.7 billion in interest and dividends, is estimated at NOK 279.0 billion.
• The general government financial balance is estimated at NOK 277.3 billion, equivalent to 7.6 percent of GDP.
• The market value of the Government Pension Fund Global is estimated at NOK 8 700 billion at the end of 2018, and NOK 9 195 billion at the end of 2019.

Read more: The Norwegian Fiscal Policy Framework

 

Key figures for the Norwegian economy. Percentage volume change from previous year

	Billion NOK1
	2017	2017	2018	2019	2020
Private consumption	1 471.8	2.2	2.6	2.9	2.9
Public consumption	797.4	2.5	1.6	1.5
Gross fixed investment	824.6	3.6	1.1	3.0	3.2
Of which: Petroleum extraction and pipeline transp.	150.9	-3.8	4.8	8.3	6.9
Business sector              Mainland Norway	295.8	9.3	6.0	5.3	3.3
Housing	198.6	7.0	-10.1	-4.3	1.7
Public sector	175.1	3.6	3.6	1.2
Demand from Mainland Norway2	2 938.6	3.3	1.9	2.3	2.3
Exports	1 196.9	-0.2	1.7	2.2	5.5
Of which: Crude oil and natural gas	459.5	1.5	-4.9	-1.3	8.4
Goods except oil and gas	381.3	1.7	4.6	5.6	5.4
Services except oil, gas and shipping	231.6	-5.8	6.2	4.1	5.2
Imports	1 092.7	1.6	4.7	3.0	3.1
Gross domestic product	3 304.4	2.0	1.7	2.3	3.3
Of which: Mainland Norway	2 798.1	2.0	2.3	2.7	2.8
Other key figures:
Employment. 1 000 persons		1.1	1.6	1.3	0.9
Unemployment rate. LFS (level)		4.2	3.8	3.7	3.7
Unemployment rate. Registered (level)3		2.7	2.3	2.2	2.2
Annual wage		2.3	2.8	3 ¼
Consumer price index (CPI)		1.8	2.5	1.5	1.7
Underlying inflation (CPI-ATE)		1.4	1.3	1.8	2.1
Crude oil price. NOK per barrel (level)		445	578	583	562
Three-month money market rates. Pct.4		0.9	1.1	1.4	1.8
Import-weighted exchange rate (yearly change)5		-0.8	-0.2	-0.7	0.0

1) Preliminary national accounts in current prices.
2) Excluding inventory changes.
3) Measured as per cent of the LFS labour force.
4) Technically calculated using forward prices in August.
5) Positive number indicates a depreciation of the krone.

Sources: Statistics Norway, Norges Bank, Norwegian Labour and Welfare Administration, Reuters and Ministry of Finance.

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

	2017	2018	2019
1. Fiscal Budget
Total revenues	1 225.9	1 347.1	1 430.4
Revenues from petroleum activities	194.4	283.9	312.8
Revenues excl. petroleum activities	1 031.5	1 063.1	1 117.6
Total expenditures	1 280.9	1 322.8	1 377.1
Expenditures on petroleum activities	26.6	25.0	27.0
Expenditures excl. petroleum activities	1 254.3	1 297.8	1 350.1
Fiscal budget surplus before transfers from the Pension Fund Global	-55.0	24.2	53.3
Net revenues from petroleum activities	167.8	258.9	285.8
=  Non-oil budget surplus	-222.8	-234.7	-232.5
+  Transfers from the Pension Fund Global	231.4	234.7	232.5
=  Fiscal Budget surplus	8.6	0.0	0.0
2. Government Pension Fund
Net transfer to the Pension Fund Global	-63.5	24.2	53.3
+  Interest and dividends on the Pension Fund	203.6	213.4	225.7
3. Fiscal Budget and Government Pension Fund consolidated surplus	148.6	237.6	279.0

Source: Ministry of Finance.

 

General government financial balance. NOK million

	2017	2018	2019
Central government financial balance	183 038	286 755	302 286
Fiscal Budget surplus and Surplus in Government Pension Fund	148 646	237 643	279 028
Non-oil budget surplus	-222 826	-234 703	-232 494
Net revenues from petroleum activities	167 847	258 946	285 822
Interest and dividends on the Pension Fund	203 625	213 400	225 700
Surplus in other central government and social security accounts	-2 142	-1 169	370
Definitional differences between Fiscal Budget and national accounts1	36 534	50 282	22 888
+ Local government financial balance	-15 957	-22 267	-25 015
= General government financial balance	167 081	264 489	277 270
In per cent of GDP	5.1	7.5	7.6

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.