The Revised National Budget 2016

This page contains information in English about Norway's Revised National Budget for 2016, presented to the Storting as Report no. 2 (2015-2016) on 
11 May 2016. The Revised National Budget presents the Government's programme for the implementation of economic policy and projections for the Norwegian economy.

Norwegian Ministry of Finance

Siv Jensen
Minister of Finance
May 2016

Information in english

Press Release

No.:

24/2016

Date:

11.05.2016

Contact:

Press telephone , Telephone +47 22 24 44 11

 PDF version for print

A budget to promote employment, growth and structural adjustment

“Lower demand from the petroleum sector has dampened growth and increased unemployment in Norway’s southern and western regions. The government proposes new targeted policies to boost employment in the most affected regions,” says Minister of Finance Siv Jensen.

Developments in the Norwegian economy are diverse. Unemployment has increased, principally in oil-dependent southern and western regions. However, employment continues to grow in large parts of the country. Mainland GDP is projected to grow in 2016, although at a slower pace than forecast in October.

The Norwegian policy framework helps dampen the impact of the oil price shock on the mainland economy. The central bank’s key policy rate is at a record low and the Norwegian krone has depreciated sharply. The weak krone has improved export-oriented firms’ competitiveness, while low interest rates have reduced the cost of financing. Low wage growth is also supporting growth in sectors exposed to international competition.

Fiscal policy is used actively to support employment, aggregate demand and necessary structural adjustments in the economy. The budget for 2016 is among the most expansionary since the fiscal guidelines were introduced in 2001, and includes measures to support employment and activity in particularly affected regions.

“A key priority for the Government in the current situation is to support growth and employment in sectors exposed to international competition. Tax reform with lower taxes and increased spending on education and infrastructure, is essential in this respect,” says Finance Minister Siv Jensen.

The Revised National Budget for 2016 forecasts a structural non-oil deficit of NOK 205.6 billion, equivalent to 2.8 per cent of the value of the Government Pension Fund Global. The fiscal stance, measured as the change in the structural non-oil deficit as a share of trend GDP for Mainland Norway, is estimated at 1.1 percentage points, up from 0.7 percentage points in the Approved Fiscal Budget for 2016.

Fiscal Policy
The Norwegian policy framework shields the fiscal budget from fluctuations in oil and gas revenues. The state’s net cash flow from petroleum is transferred in full to the Government Pension Fund Global. The use of petroleum revenues, i.e. the withdrawal from the Fund, fully covers the non-oil budget deficit. The fiscal guidelines stipulate a gradual and sustainable use of petroleum revenues over time in line with the expected real return on the Government Pension Fund Global, estimated at 4 per cent. A decline in the price of oil therefore has no immediate impact on the fiscal stance, but translates into reduced fiscal space over time.

The main features of the revised budget for 2016:

  • Spending of petroleum revenues, as measured by the structural non-oil budget deficit, is estimated to be NOK 205.6 billion. This is equivalent to 7.5 per cent of GDP for Mainland Norway, up from 6.4 per cent in 2015. The structural non-oil budget deficit corresponds to 2.8 per cent of the value of the Government Pension Fund Global. Given the strong growth of the Fund over the past three years, of which about one half is due to a weaker Norwegian krone, spending of petroleum revenues is held well below 4 per cent of the capital in the Fund.
  • The real underlying growth in budget expenditures from 2015 to 2016 is 3.5 per cent. In nominal terms expenditures increase by 6.0 per cent.
  • The non-oil fiscal budget deficit is estimated to be NOK 215.9 billion. This deficit is covered by a transfer from the Government Pension Fund Global.
  • Net cash flow from petroleum activities is estimated at NOK 131.7 billion.
  • The consolidated surplus on the Fiscal Budget and the Government Pension Fund, including NOK 201.5 billion in interest and dividends, is NOK 117.2 billion.
  • A general government financial balance of NOK 102.9 billion, equivalent to
    3.3 per cent of GDP.
  • The market value of the Government Pension Fund Global is estimated to be
    NOK 7 150 billion at the end of 2016.

Tax policy
Within the confines of a stable tax system, there are only minor changes proposed to the tax system. The implementation of the Air Passenger Tax is postponed from 1 April to 1 June. Furthermore, the Government will allow for a temporary net wealth tax deferral for owners of businesses which are running a deficit in their financial statements. A proposal will be presented to the Parliament this autumn.

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 must balance the need for low and stable inflation against the outlook for production and employment. The operational target is defined as an annual increase in consumer prices of close to 2.5 per cent over time. The central bank’s (Norges Bank) key policy rate is currently 0.5 per cent.

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. 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 aims to achieve high financial returns subject to a moderate level of risk.

Key figures for the Norwegian economy1

 

NOK billion2 3

     

 

2015

2015

2016

2017

Privat consumption

1335.6

2.0

1.0

1.7

Public consumption

727.3

1.8

3.0

2.0

Gross fixed investment

728.8

-4.0

-1.8

1.9

     Petroleum

190.4

-14.7

-14.0

-8.0

     Business sector. Mainland Norway

225.7

-2.8

0.3

4.9

Exports

1162.8

2.3

-0.9

1.2

     Crude oil and natural gas

450.0

0.9

-4.0

-1.4

Traditional goods

374.4

5.5

3.1

4.2

     Imports

982.0

0.6

0.8

3.0

     Traditional goods

583.9

1.7

1.5

3.3

Gross domestic product

3140.8

1.6

0.1

1.1

     Mainland Norway

2610.7

1.0

1.0

1.7

Employment growth

 

0.6

0.2

0.7

Unemployment rate (LFS)

 

4.4

4.7

4.6

Wage growth

 

2.8

2.4

2.8

Consumer price inflation (CPI)

 

2.1

2.8

2.1

Underlying inflation (CPI-ATE)

 

2.7

2.8

2.2

Crude oil per barrel. NOK3

 

430

346

396

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

 

2014

2015

2016

1. Fiscal Budget

     

Total revenues

1278.8

1227.4

1174.9

    Revenues from petroleum activities

347.0

247.2

161.7

    Revenues excl. petroleum activities

931.7

980.2

1013.2

Total expenditures

1127.1

1194.5

1259.1

    Expenditures on petroleum activities

35.4

29.0

30.0

    Expenditures excl. petroleum activities

1091.7

1165.5

1229.1

Fiscal budget surplus before transfers to the Pension Fund Global

151.7

32.9

-84.2

Net revenues from petroleum activities

311.7

218.3

131.7

= Non-oil budget surplus

-160.0

-185.3

-215.9

+ Transfers from the Pension Fund Global

156.2

186.1

215.9

= Fiscal Budget surplus

-3.8

0.8

0.0

2. Government Pension Fund

     

Net transfer to the Pension Fund Global

155.5

32.2

-84.2

+ Interest and dividends on the Pension Fund

160.1

192.0

201.5

= Surplus in the Pension Fund

315.6

224.2

117.2

3. Fiscal Budget and Government Pension Fund
consolidated surplus
 

311.7

225.0

117.2

Source: Ministry of Finance.

 

 

General government financial balance. NOK million

 

2014

2015

2016

Central government financial balance

298 451

201 311

116 908

     Fiscal Budget surplus and Surplus in Government Pension Fund

311 743

224 953

117 226

         Non-oil budget surplus

-160 008

-185 312

-215 911

         Net revenues from petroleum activities

311 667

218 256

131 687

         Interest and dividends on the Pension Fund

160 085

192 008

201 450

     Surplus in other central government and social security accounts

- 1 602

238

-141

   Definitional differences between Fiscal Budget and national accounts1

-11 691

-23 880

-177

+ Local government financial balance

-23 176

-19 849

-13 993

= General government financial balance

275 275

181 462

102 916

In per cent of GDP

8.7

5.8

3.3

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.