Norway cuts spending from oil fund to $33.6 bln in election year budget

MACROECONOMICS - OSLO. Norway plans to rein in spending from its $1.1 trillion sovereign wealth fund next year as the economy rebounds from the COVID-19 pandemic, the centre-right minority coalition told parliament on Wednesday.

The government proposed withdrawing 313.4 billion Norwegian crowns ($33.56 billion) from the wealth fund in what will be an election-year budget, down from 404.3 billion crowns in 2020.

The so-called structural non-oil deficit corresponds to 3.0% of the fund's expected value at year-end, the Finance Ministry said, exactly in line with parliament's cap on spending.

The projected spending for 2020 corresponded to 3.9% of the fund's value however, taking advantage of a rule allowing extra spending in times of economic hardship, but was still lower than the 4.2% projected in May.

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Mainland gross domestic product, also known as non-oil GDP, is now expected to contract by 3.1% in 2020, less severe than the 4.0% drop seen in May, and next year will see a 4.4% rebound, the government predicted.

Conservative Prime Minister Erna Solberg must seek backing for the budget from the rightwing Progress Party however, a previous partner which left the government in January in a dispute over immigration and security.

($1 = 9.3389 Norwegian crowns) 

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