As Norway decides how to spend its oil wealth in next year’s budget, parties key to the government’s ability to stay in power are questioning its priorities.
The Liberals, a key support party for the minority government, demanded the Conservative-led coalition rein in the amount of oil money it uses in 2015.
“Spending of money from the oil fund is increasing quite quickly, it’s time to prioritize the important issues where we need to spend and find the money from other” sectors, said Terje Breivik, a Liberal Party member who sits on the parliamentary finance committee.
The government, which has already said it will lower taxes, is meeting on Wednesday and Thursday for its budget conference to discuss fiscal plans for next year. The budget will be presented to parliament on October 8 and will then be subject to talks with the Liberals and the Christian Democrats.
The coalition is also under pressure to use more oil revenue on tax cuts and spending from members of Finance Minister Siv Jensen’s Progress Party.
Norway puts most of the income from its offshore oil fields into a fund that invests abroad to avoid stoking inflation and pushing up interest rates and the krone.
Before heading into talks today, Prime Minister Erna Solberg said that she will factor in both a slowdown in oil investments and the underlying strength of the economy.
“As we lay the foundation for the budget, we will take into account that the overall economic situation is good in Norway,” Solberg said at a press conference in Oslo.
“Even with challenges with competitiveness and slowing oil investments, we are in a good position.”
Solberg said that the government will give voters what was promised, improving competitiveness and investing in education, knowledge and infrastructure.
The Conservative-led minority government in its May revised budget estimated that it will use a record 140.9billion kroner ($23billion) of the oil revenue to fill budget gaps and support a slowing expansion. That was equal to about 2.8% of the nation’s wealth fund, below the 4% fiscal limit.
Norwegian governments have kept oil money spending below the rule since 2009. As the $880billion fund grows, the fiscal rule allows for more and more oil money to be funneled into the budget.
The fund has grown fivefold since 2005.
The economy, excluding oil and gas, expanded 1.2% in the second quarter, twice the estimated pace, as consumer spending and investment underpinned growth.
Still, the overall economy faces pressure from a slowdown in oil investments, as producers cut spending to cope with rising costs.
A key survey by Norway’s statistics agency showed in June that oil companies predict investments will drop by as much as 21% next year as the industry grapples with high costs. The central bank expects a 10% drop.
The government in May predicted mainland economic growth, which excludes oil and gas output, of 1.9% this year and 2.2% next year.
Recommended for you
