Norway reduces drawdown of oil funds as economy improves

NORWAY - In a revision of Norway's fiscal budget for 2010 the government proposes to reduce the use of petroleum revenues by NOK17bn (€2.18bn) compared to the approved budget as economic activity has picked up.

The reduction brings the use of petroleum revenues significantly closer to the 4% path of the fiscal policy guideline. These guidelines stipulate that fiscal policy shall be geared towards a gradual increase in the use of petroleum revenues. Over time, the non-oil structural budget deficit shall correspond to the expected real return on the Government Pension Fund Global, estimated at 4%.

The guidelines allow for fiscal policy to be used actively to counter fluctuations in economic activity and the government has over the years made use of this flexibility in the guidelines.

The expansionary fiscal policy in 2009 and 2010 brought the use of petroleum revenues to a high level, even though state accounts showed that spending of petroleum revenues in excess of 4% of Government Pension Fund Global was NOK20bn lower in 2009 than projected in the national budget 2010.

However, Norway is in the enviable position of fiscal surpluses as a result of its well-managed oil wealth. In 2009, the central government received a net cash flow from petroleum activities of about NOK262bn and there is a consolidated surplus in the fiscal budget and the Government Pension Fund, including interest and dividends, of NOK230bn.