A budget to promote growth, sustainability, and inclusiveness

“Through cooperation, we have handled the steepest economic downturn since WWII. In 2022, economic activity will be above trend, job opportunities will be ample, and over 90 percent of the adult population have been vaccinated. The health sector must remain at high alert, but with our joint effort, we will make the pandemic history,“ says Minister of Finance Jan Tore Sanner (Conservative party).

We estimate economic growth will be above normal also in 2023 and 2024.

Employment among residents has not been higher since 2012, whereas short-term immigration is substantially lower than before the pandemic. In several industries, businesses have difficulties with finding qualified labour.

“In the last months, entry of new businesses is record high. Lack of skilled labour must not become a bottleneck for further growth. We will continue our commitment towards strengthening education and enhancing competence. We will use the positive momentum from the crisis and speed up developments towards a greener, more digital society,“ says Minister Sanner.

With the proposed budget, the structural non-oil fiscal deficit is estimated at NOK 322.4 billion in 2022, equalling 2.6 percent of the expected capital of the GPFG at the beginning of the year, down from 3.6 percent this year. 

“We will bring the structural non-oil deficit down well below the 3 per cent estimated real return on the GPFG. The budget is well adapted to the current cyclical position of the Norwegian economy and makes us more robust to future shocks,“ says Minister Sanner.

The structural non-oil fiscal deficit is reduced by 2.6 percent of GDP (the fiscal impulse), mainly due to the termination of the extraordinary and temporary COVID-19 economic policy measures.

Even if the Norwegian economy at large has weathered the crisis, some groups were severely hit and will need assistance also in 2022. The government emphasizes measures that build competence, create opportunities and improve labour market inclusion.

“This crisis hit some groups disproportionally. Our ambition is that, unlike after previous downturns, this crisis will not leave people permanently outside the labour market,“ says Minister Sanner.

These are the most important strategies:

In the 2022 National Budget the Government will prioritize measures that:

• Facilitate private sector job creation
• Support those who remain heavily affected by the corona crisis.
• Promote efforts to strengthen skills that match the demands of businesses
• Speed up green transition and digitalisation
• Enable safe and good living conditions throughout the country
• Strengthen pandemic preparedness, by securing access to vaccines, protective equipment, and medical supplies.

Norway countered the corona crisis with forceful measures to safeguard employees and businesses, but also with innovation and adaptability. We have also taken significant steps towards a greener and more digitalized society.

Table 1: Key figures for the Norwegian economy. Percentage volume change from previous year, unless otherwise stated

	NOK billion1
	2020	2020	2021	2022
Private consumption	1 496,4	-6,9	4,0	11,1
Public consumption	905,6	1,7	3,9	-0,2
Gross fixed investments	907,0	-3,8	0,9	-0,4
Of which:  Petroleum extraction and pipeline transportation	180,8	-4,1	1,0	-14,4
Businesses in mainland Norway	313,6	-6,1	0,9	4,4
Housing	190,7	-4,0	4,2	4,1
Public sector	216,4	-1,0	-2,5	-0,2
Mainland Norway demand2	3 122,7	-3,9	3,4	6,0
Exports	1 110,0	-0,5	5,2	7,1
Of which:  Crude oil and natural gas	353,0	10,1	3,5	4,8
Goods and services, except oil and gas	637,0	-8,2	6,4	9,9
Imports	1 125,3	-11,9	3,7	10,6
Gross domestic product	3 413,5	-0,8	3,8	4,0
Of which: Mainland Norway	3 043,0	-2,5	3,9	3,8
Other key figures:
Employment, persons		-1,3	0,8	1,4
Unemployment rate, LFS (level) 3		4,6	4,7	4,1
Unemployment rate, registered (level)		5,0	3,2	2,4
Annual wage growth		3,1	2,8	3,0
Consumer price inflation (CPI)		1,3	2,8	1,3
Underlying inflation (CPI-ATE)		3,0	1,8	1,6
Crude oil prices, NOK per barrel (current prices)		407	568	559
Crude oil prices, USD per barrel (current prices)		43	68	67
Three-month money market rate, pct.4		0,7	0,5	1,1
Import-weighted exchange rate (I-44), annual changes in pct 5		6,3	-6,4	-0,3
GDP growth on the part of Norway’s trading partners 6		-4,3	5,0	4,1

¹ Provisional national account figures in current prices.

² Excluding inventory changes.

³An alternation in the Labour force survey from January 1 2021 may lead to a break

⁴ Technically calculated using forward prices in March.

⁵ Positive number indicates Norwegian krone depreciation.

⁶ Norway’s 25 most important trading partners weighted by their respective shares of Norwegian goods exports, except oil and gas.

Sources: Statistics Norway, ICE, Norges Bank, Norwegian Labour and Welfare Administration, Reuters, Macrobond and the Ministry of Finance.

Table 2 Key figures for the fiscal budget and the Government Pension Fund. NOK billion

	2020	2021	2022
Total revenues	1 288,8	1 366,3	1 553,3
1 Revenues from petroleum activities	134,4	210,1	303,6
1.1 Taxes and duties	35,4	58,9	167,9
1.2 Other petroleum revenues	99,0	151,2	135,7
2 Non-petroleum revenues	1 154,4	1 156,2	1 249,7
2.1 Mainland Norway taxes	1 054,2	1 074,7	1 165,8
2.2 Other revenues	100,2	81,4	83,9
Total expenditure	1 552,5	1 595,0	1 576,5
1 Expenditure on petroleum activities	27,6	26,0	26,5
2 Non-petroleum expenditure	1 524,9	1 569,0	1 550,0
Fiscal budget surplus before transfers to the Government Pension Fund Global	-263,7	-228,7	-23,2
- Net cash flow from petroleum revenues	106,8	184,1	277,1
= Oljekorrigert overskudd	-370,5	-412,8	-300,3
+ Overført fra Statens pensjonsfond utland	417,4	412,8	300,3
= Non-oil fiscal surplus	46,9	0,0	0,0
+ Net transfer to the Government Pension Fund Global	-310,6	-228,7	-23,2
+ Interest and dividends, etc., on the Government Pension Fund1	224,5	205,4	233,8
= Fiscal budget and Government Pension Fund consolidated surplus1	-39,2	-23,3	210,6
Memo:
Market value of the Government Pension Fund Global2	10 086	10 907	12 250
Market value of the Government Pension Fund2	10 355	11 199	12 552
National insurance retirement pension liabilities2,3	8 941	9 201	9 634
Structural non-oil fiscal deficit, NOK billion	364,9	397,2	322,4
Percentage of the fund capital	3,6	3,6	2,6
Percentage of mainland Norway trend GDP	11,5	12,1	9,5
Budget indicator, percentage points4	3,8	0,6	-2,6
Real underlying expenditure growth, pct.	8,8	1,0	-3,4

¹ Not including securities gains or losses.

² At the beginning of the year.

³ Net present value of already accrued rights to future retirement pension payments under the national insurance scheme.

⁴ Positive numbers indicate an expansionary fiscal stance. The indicator does not take into consideration that different revenues and expenditure items may differ in their impact on economic activity.

Sources: Ministry of Finance and Statistics Norway.