Producing more and making working life more inclusive

“We will have to live with the coronavirus pandemic next year as well. The fiscal budget shall therefore ensure both effective infection control and maximum job creation. Some industries will still need additional help to get through the crisis. We shall at the same time facilitate economic growth and the green transition, in order to meet the challenges facing us,” says Minister of Finance Jan Tore Sanner.

The fiscal budget for 2021 is based on the Government’s coronavirus crisis exit strategy: Producing More and Making Working Life More Inclusive. Economic policy shall serve to:

1. Get people back to work: We need to help businesses get going again all over the country and get as many people as possible back to work.
2. Diversify the economy: We need to create more jobs, in more industries, all over the country. This growth must come in the private sector. We invest in road and rail transport, and improve operating conditions for business.
3. Create a green future: We need to enable businesses to create green jobs and a more sustainable future.
4. Build skills: We shall ensure that more people complete upper secondary education and acquire the skills needed to thrive in the labour market and the business sector of the future. We shall evolve the Education Initiative 2020.
5. Make society more inclusive: Everyone shall have the opportunity to participate, in both working life and society in general.
6. Preserve security and trust in Norwegian society and maintain a strong international involvement.

“The Government is in the fiscal budget 2021 continuing its long-term effort to strengthen the sustainability and resilience of the Norwegian economy. Although the economy is now doing better, I need to emphasise that the crisis is not over. The budget we are presenting today provides for measures to keep the corona spread under control, and serves to create economic growth and jobs,” says the Minister of Finance.

It has in 2020 been necessary to launch extensive economic measures to reduce the negative impact of the pandemic. The Government has, in line with the fiscal rule, increased the structural non-oil deficit to support economic activity and jobs, and to reduce unemployment.

“We will do everything in our power to ensure that Norway emerges from this crisis in the best possible position, as well as to prevent the young from having to foot the bill,” says the Minister of Finance.

Next year’s budget is based on the premise that there is still a need for an expansionary fiscal policy stance, although on a smaller scale than this year. Many of the temporary emergency measures introduced in immediate response to the outbreak are phased out, with the structural non-oil deficit being reverted to the long-term guideline of three percent of fund value. Spending is nonetheless significantly higher than before the pandemic started, and the budgets for 2020 and 2021 will all in all boost economic activity and job creation next year.

These are the key measures:

1. Get people back to work

• Expansionary fiscal policy stance to be maintained in 2021, to stimulate economic growth nationwide
• Broad income tax reductions
• 7,000 new labour market programme places

2. Diversify the economy

• Tax changes to boost business:
  • Further reduction of the tax on operating assets
  • Increase the tax-exempted benefit on employee purchases of shares of the employing company
  • Restructuring of power generation taxation – provides companies with liquidity when they invest
  • 15-percent withholding tax on the payment of interest and royalties
  • Simpler rules
• NOK 45 billion for research and development
• Major road and railway investments
• Continued high priority to innovation and export promotion measures

3. Create a green future:

• Increase CO₂ tax
• NOK 2.7 billion for CO₂ capture, transport and storage
• «Green platform»
• Climate-friendly transport solutions
• Continue measures to promote green shipping and fleet renewal

4. Build skills:

• 5,000 additional university and university college places
• 2,100 additional higher vocational education places, including the Industrial Trade School
• Facilitate an increase in upper secondary education completion rates
• NOK 900 million for the «Lifelong Learning» skills reform
• Make it easier to combine education and work
• Extend the scope for combining unemployment benefit with skill-enhancing training programmes until 1 July

5. Make society more inclusive:

• Labour market programmes: Prioritise youth and vulnerable groups
• The Inclusion Initiative:
  • Job support
  • Mentor scheme and wage support
  • On-the-job training
  • Training coordinator
• Integration:
  • The Job Opportunity Scheme
  • Language training
  • Freedom from negative social control
  • Interpretation services

6. Preserve security and trust in Norwegian society and maintain a strong international involvement

• Increase child benefit and lump-sum maternity benefit
• Expand trial project on leisure activity cards for children
• Increase grants for participating in holiday and leisure activities
• Expand discount schemes under the after-school leisure activity programme
• Prioritise strong hospital funding and high-quality health services
• NOK 3.5 billion increase in defence sector appropriations
• Keep the 400 new police jobs
• Maintain development assistance at 1 percent of GNI

Table 1 Key figures for the Norwegian economy. Percentage volume change from previous year, unless otherwise stated

	NOK billion1
	2019	2019	2020	2021
Private consumption	1,591.3	1.5	-6.0	7.8
Public consumption	866.7	1.7	2.2	1.1
Gross fixed investment	926.5	6.1	-5.0	1.0
Of which: Petroleum extraction and pipeline transportation	178.4	12.8	-2.2	-11.5
Businesses in mainland Norway	335.8	5.6	-10.6	5.4
Housing	196.2	-0.9	-6.9	4.9
Public sector	212.7	7.5	4.5	1.1
Mainland Norway demand 2	3,202.7	2.2	-4.2	5.7
Exports	1,311.5	1.5	-2.1	4.3
Of which: Crude oil and natural gas	463.7	-4.3	9.0	6.3
Goods, except oil and gas	432.3	4.9	-4.4	3.5
Services, except oil, gas and shipping	272.4	6.2	-13.2	6.2
Imports	1,249.3	5.2	-10.6	4.7
Gross domestic product	3,549.4	1.2	-1.5	4.5
Of which: Mainland Norway	3,038.6	2.3	-3.1	4.4
Other key figures:
Employment, persons		1.6	-1.6	0.6
Unemployment rate, LFS (level)		3.7	4.7	4.4
Unemployment rate, registered (level)		2.2	4.9	3.1
Annual wage growth		3.5	1.7	2.2
Consumer price inflation (CPI)		2.2	1.1	3.5
Underlying inflation (CPI-ATE)		2.2	2.7	2.2
Crude oil price, NOK per barrel (current prices)		564	408	424
Three-month money market rate, pct.3		1.6	0.7	0.4
Import-weighted exchange rate (I-44), annual change in pct.4		2.9	5.7	-2.4
GDP growth on the part of Norway’s trading partners.5		1.9	-6.3	4.8

¹ Provisional national account figures in current prices.

² Excluding inventory changes.

³ Technically calculated using forward prices in September.

⁴ Positive number indicates Norwegian krone depreciation.

⁵ Norway’s 25 most important trading partners weighted by their respective shares of Norwegian goods exports, except oil and gas.

Sources: Statistics Norway, ICE, Norges Bank, Norwegian Labour and Welfare Administration, Reuters, Macrobond, OECD, IMF, Eurostat and the Ministry of Finance.

 

Table 2 Key figures for the fiscal budget and the Government Pension Fund. NOK billion

	2019	2020	2021
Total revenues	1,407.4	1,236.9	1,242.1
1 Revenues from petroleum activities	283.2	114.7	122.3
1.1 Taxes	140.4	30.2	15.9
1.2 Other petroleum revenues	142.9	84.5	106.4
2 Non-petroleum revenues	1,124.2	1,122.2	1,119.8
2.1 Mainland Norway taxes	1,030.9	1,024.7	1,040.9
2.2 Other revenues	93.3	97.5	78.9
Total expenditure	1,378.1	1,583.4	1,514.8
1 Expenditure on petroleum activities	26.3	28.0	23.8
2 Non-petroleum expenditure	1,351.8	1,555.4	1,491.0
Fiscal budget surplus before transfers to the Government Pension Fund Global	29.3	-346.5	-272.7
- Net cash flow from petroleum revenues	256.9	86.7	98.5
= Non-oil budget surplus	-227.6	-433.2	-371.2
+ Transfer from the Government Pension Fund Global	228.6	433.2	371.2
= Fiscal budget surplus	0.9	0.0	0.0
+ Net transfer to the Government Pension Fund Global	28.4	-346.5	-272.7
+ Interest and dividends, etc., on the Government Pension Fund1	247.5	223.0	235.1
= Fiscal budget and Government Pension Fund consolidated surplus1	276.7	-123.5	-37.6
Memo:
Market value of the Government Pension Fund Global2	8,243	10,086	10,300
Market value of the Government Pension Fund2	8,483	10,355	10,577
National insurance retirement pension liabilities2,3	8,722	8,941	9,201
Structural non-oil fiscal deficit, NOK billion	242.6	395.0	313.4
Percentage of the fund capital	2.9	3.9	3.0
Percentage of mainland Norway trend GDP	7.9	12.3	9.4
Budget indicator, percentage points4	0.4	4.5	-2.9
Coronavirus-adjusted budget indicator, percentage points5			1.0
Real underlying expenditure growth, pct	1.7	10.1	-4.6

¹ Not including securities gains or losses.

² At the beginning of the year.

³ Net present value of already accrued rights to future retirement pension payments under the national insurance scheme.

⁴ Change in structurul non-oil deficit as percentage of mainland Norway trend GDP. Positive numbers indicate an expansionary fiscal stance. The indicator does not take into consideration that different revenues and expenditure items may differ in their impact on economic activity.

⁵ Adjusted for the extensive and temporary extraordinary coronavirus measures in 2020, the structural non-oil fiscal deficit will increase by about 1 percent from 2020 to 2021, measured in relation to mainland Norway trend GDP.

Sources: Ministry of Finance and Statistics Norway.