— In the revised state budget of GDP by 2020, reduced by 4%
Record withdrawals from the wealth Fund will lead to the sale of assets
Norway plans this year to spend a record $ 420 billion kroner ($41 billion) from its national wealth Fund to withstand the economic downturn in the face of brutal pandemic covid-19.
The richest economy in Scandinavia and the largest in Europe oil and gas the country faces strikes on two fronts. Pandemic coronavirus led to the closure of businesses and cessation of economic activities in the country, and on world oil markets has been the collapse of prices. Today the Norwegian government believes that the country’s GDP in 2020 will decrease by 4%.
Recession may go deeper, because “uncertainty is extremely high,” said the government, in its statement, stressing that the key figures of the revised budget will be presented on Tuesday.
Over decades of oil production, Norway has accumulated one trillion dollars, which is at the expense of the national welfare Fund. It gives her enormous fiscal power. The so-called structural deficit adjusted for oil this year will amount to 4.2% of the total assets of the Fund exceeding the limit of 3%.
“This is big money, — said the Minister of Finance, speaking on Norwegian radio. — We have to realize that spending more money now we spend less money in the coming years.”
When the cost of oil money exceeds the state income from oil production, the government takes money from the welfare Fund. So it was during the previous fall in oil prices, but in 2020 will for the first time the situation arises, when the withdrawals exceed the amount of dividends and interest received, and the money will have to be removed from the main accounts of the Fund. The amount of withdrawal will be included in the expenditure budget 10: 45 a.m. local time.
In April, the government declared that can go to extreme measures such as paying compensation to the companies for lost profits, loan guarantees and increase unemployment benefits, and that these measures will weaken the current year’s budget for 201 billion kroner in comparison with the original plan, which was submitted in October. But since then, the amount of this assessment has increased.
Changes compared to last year is striking. The government led by the conservatives were planning a small decline in oil costs to 244 billion kroons, which is fiscal stimulus minus 0.2 percentage points. This figure is obtained by dividing the growth of the structural deficit adjusted for oil to trend GDP, and now it jumped to 5.1 percentage points with a plus sign.
Norway is slowly returning to normalcy, opening schools and removing the restrictions imposed on a company because she was able to take the outbreak of the coronavirus under control. But the country is heavily dependent on exports and the price of oil, and therefore, it is necessary to prepare for the long-term effects of the global recession.
Simultaneously with the measures of the government the Norwegian Central Bank cut the key rate by half a percentage point to an unprecedented rate of 0%. He did it in three stages, starting in March. He also intervened in supporting the weak crown and providing banks with cheap liquidity.