Chapter 2

Fiscal Policy

2.3 Public Finances in the Medium Term

The new guidelines for economic policy mean that fiscal policy stipulate a use of oil revenues in line with the expected real return on the Petroleum Fund. The estimates for the capital in the Petroleum Fund in the period 2002-2010 are based on two main assumptions:

Given these assumptions, the Petroleum Fund may increase from 57 per cent of GDP at the end of 2002 to 118 per cent of GDP in 2010. As measured by the structural, non-oil budget deficit, the use of petroleum revenues over the Fiscal Budget will correspond to about 5 per cent of mainland trend GDP in 2010, while the corresponding share is estimated at 1.7 per cent in 2001. Compared with a neutral fiscal stance, the guideline implies an average annual increase in the use of petroleum revenues over the next four years of about 1/2 per cent of mainland trend GDP. The fiscal rule of spending the expected real return on the Petroleum Fund implies a gradual increase in the use of petroleum revenues over the next ten years.