A budget to safeguard Norway in an unsafe era

‘The Norwegian economy is growing, unemployment is low and households have more purchasing power. This is a good starting point in a world that is more unstable than it has been for a long time. At the same time, many Norwegians are experiencing financial insecurity. It is therefore important to continue to ensure sound financial management,’ said Minister of Finance Jens Stoltenberg.

To help improve people’s finances, the Government proposes to reduce income tax by NOK 6.4 billion in next year’s budget.

‘This is the largest cut in income tax in a budget in 20 years. By doing this, we are following up the Tax Commission’s proposal and taking a new, vital step towards reforming the tax system. We are pivoting from tax on work to tax on consumption,’ said Mr Stoltenberg.

Safeguarding the nation

The Government is giving priority to defence, security and emergency preparedness. Defence capabilities will continue to be ramped up with an additional NOK 6.5 billion next year in line with the long-term plan. In total, defence expenditure is forecast to amount to 3.4% of Norway’s gross domestic product (GDP) in 2027.

The Government proposes to maintain Norway’s support to Ukraine through the Nansen Support Programme for Ukraine, with an allocation of NOK 85 billion. This is an important contribution to Ukraine’s fight to defend itself.

‘We are strengthening the Norwegian Armed Forces. In addition, we are supporting Ukraine, which is important for Norway’s security as well,’ said the Finance Minister.

Increased funding for the police and the security authorities is also proposed.

Securing welfare

‘People in every municipality across the country are to have access to good welfare services. We are proposing to increase the municipalities’ free income by NOK 3.2 billion next year,’ said Mr Stoltenberg.

Increased funding for the municipalities will also make it possible to provide more nursing homes and assisted living facilities.

A good school for everyone is an important project in the Government’s Plan for Norway. The Government is taking the development of pupils’ performance in the PISA survey seriously. A new grant is proposed in next year’s budget to enable municipalities to increase the use of small group instruction. The Government also proposes increased funding for the child welfare service and reinforced initiatives to combat child and youth crime to protect the most vulnerable children.

The Government proposes an increase in funding of NOK 3.1 billion to hospitals in order to treat more patients. The Government also proposes a new financing model to decrease waiting times. The escalation plan for mental health will be followed up.

More predictable financial situation

It is expected that 2027 will be the fourth year in a row that people have had more purchasing power. A stable economy, low unemployment and responsible budgets all contribute to this. Since this Government came to power, it has prioritised income tax cuts every year.

‘Lower income tax helps improve people’s everyday financial situation. It also makes it more beneficial to work and may encourage people to work longer,’ said Mr Stoltenberg.

A family with two salaries of NOK 750,000 will pay NOK 15,000 less in tax next year compared to 2021. Of this, NOK 3,500 is tax relief set out in the budget being presented now.

The Government believes that people need more financial security in the face of high and fluctuating electricity prices.

The Government electricity subsidy scheme will be continued. Next year it will cover 90% of household costs above 79 øre per kilowatt hour before taxes.

Norway’s fixed electricity price scheme (Norgespris) will also be continued and, in line with current legislation, will be set every year based on historic electricity prices and estimated future electricity prices. In the National Budget for 2027, we will set the Norgespris at 45 øre/kWh plus taxes.

This means that even if the energy markets are turbulent, people will still be able to choose a stable, predictable electricity price. It is important to prevent the electricity price from fluctuating too much from year to year, and therefore, a 5 øre /kWh change is appropriate.

Using Norgespris, a typical household in southwestern Norway can save approximately NOK 8,700 next year, based on a consumption of 16,000 kWh and compared to the estimated spot price.

‘In the past few years, electricity prices have at times been extremely high. Norgespris and the electricity subsidy give people more predictable bills,’ said Finance Minister Stoltenberg.

In total, the Government electricity subsidy scheme for households is estimated to cost just under NOK 16.4 billion in 2027.

Since this Government came to power, we have introduced free before- and after-school care, kindergarten fees have been reduced, and child benefit has been increased. In the proposed budget for next year, the maximum kindergarten fee of NOK 1,200 and child benefit over NOK 2,000 will be continued.

This means that whereas kindergarten fees in 2021 were twice as high as child benefit, child benefit is now nearly twice as high as kindergarten fees. This is a massive boost for families with children.

Other measures in the budget

The Government will retain its tax pledge next year. This means that the overall levels of taxes and duties will not increase.

‘Last year, the Government appointed a broad-based tax commission and the commission’s report has now undergone consultation. The Government will present a white paper to the Storting early next year, and in this budget we are taking new and important steps towards a tax reform,’ said Mr Stoltenberg.

In line with the tax commission’s recommendations, the Government proposes to reduce the VAT threshold on electric cars from NOK 300,000 to NOK 150,000. Almost 98% of all new passenger cars are now electric, and in practice, the goal of all new passenger cars being zero-emission vehicles has been achieved.

The Government is continuing to increase climate taxes in line with the agreement in the Storting. Climate taxes provide low-cost, effective emission cuts and ensure that the polluter pays.

‘When more money is transferred to defence, health and municipalities, there is less funding for other areas. We must use our resources more effectively and get more for our money. This will free up funds for new initiatives,’ said the Finance Minister.

In the proposed budget, the allocations for the operation and maintenance of roads and railways are being increased, and transport projects that have already started will be continued. The completion of current projects will release funds that the Government can reallocate for other purposes.

For several years, significant funds have been allocated to the Climate and Energy Fund managed by Enova. The Government proposes reducing the allocation of new funding to the Fund by NOK 3.8 billion next year. Enova will still have significant economic elbow room to support climate and energy projects. At the beginning of 2027, it is expected that the Fund will amount to NOK 36 billion.

The Government proposes reduced allocations for industry-oriented funding instruments. Several measures are also proposed to counteract misuse of SkatteFUNN (Tax Deduction for Research and Development in an Innovative Business Sector), which is an important source of financing for research and development in business.

Many re-prioritisations have been made within the areas of responsibility of the various ministries. Reduced funding in some areas will finance increased funding in other areas.

In addition, the Government is taking a number of steps to increase access to labour, and boost productivity in the public and private sectors. This includes measures to reduce absence due to illness, a consultation on a proposal to restructure the benefit for newly arrived refugees, changes in government support for mail delivery, and streamlining requirements in the defence sector.

The Government proposes several targeted measures to better utilise artificial intelligence. This entails funding to enhance security and increase competence.

Sound financial management

The Government proposes spending NOK 608.4 billion of the Government Pension Fund in the National Budget for next year. This is an increase of NOK 4.9 billion from last year measured in fixed prices (value of NOK in 2027).

Expenditure from the Government Pension Fund is forecasted to be equivalent to 2.7% of the value of the Government Pension Fund Global. Measured as a percentage of trend GDP for mainland Norway, fund spending will be unchanged compared to this year. It is forecasted that the budget will have an approximately neutral effect on activity in the economy next year.

The Government’s proposal for the National Budget entails real, underlying increased expenditure from 2026 to 2027 of 0.2%.

‘With this budget, we are continuing to ensure sound financial management. The spending from the Government Pension Fund is in line with the fiscal rule and well below the forecast real return of 3%,’ said Finance Minister Jens Stoltenberg.

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

	BNOK1
	2025	2025	2026	2027	2028
Real economy
GDP for mainland Norway2	4,398	1.7	1.1	1.7	1.3
Employment		0.7	0.6	0.4	0.4
Unemployment rate, registered (level)		2.1	2.1	2.1	2.1
Unemployment rate, labour force survey (level)		4.5	4.5	4.5	4.5
Demand components and GDP2
Demand from mainland Norway3	4,596	1.9	1.2	1.8	2.1
Private consumption	2,341	2.6	1.4	1.8	2.0
Companies’ investments	505	2.7	1.2	1.3	3.0
Housing investments	209	-3.6	-0.4	3.2	3.8
Public demand	1,539	1.4	1.1	1.7	1.7
Petroleum investments	281	7.2	-2.0	-4.0	-7.7
Exports	2,504	2.7	2.9	-0.3	-0.3
Crude oil and natural gas	1,100	0.8	4.5	-2.9	-3.0
Mainland Norway	1,216	5.9	1.2	2.1	1.9
Imports	1,858	2.6	1.4	1.2	2.2
Gross national product (GDP)	5,511	1.1	1.3	0.7	0.4
Prices
Wages		4.9	4.6	4.0	3.5
CPI		3.1	3.3	2.7	2.4
CPI-ATE		3.1	3.1	2.8	2.4
Crude oil price, USD per barrel (current prices)		68	83	75	72
Three-month money market interest (level)4		4.4	4.5	4.6	4.0
Import-weighted kroner exchange rate (I-44, level)		119.6	113.4	112.9	112.9
NOK exchange rate5		0.6	5.4	0.5	0.0
International economy6
GDP trading partners		2.0	1.7	1.8	1.8
KPI trading partners		2.1	2.5	2.3	2.2

 ¹ Preliminary national accounts figures at current prices.

² Growth rates from and including 2025, stated in volume.

³ Excluding changes to inventory.

⁴ Corresponds to the prognosis for the money-market interest from Norges Bank’s monetary policy report 2/26.

⁵ Percentage change in the inverse exchange rate index I-44. Positive figures indicate a stronger NOK.

⁶ Norway’s ten most important trading partners weighted together with their respective share of Norwegian exported goods, excluding oil and gas, and Norwegian imported goods, excluding ships, oil platforms and crude oil, respectively.

Sources: Statistics Norway, IMF, Eurostat, Norges Bank, the Norwegian Labour and Welfare Administration (NAV), Reuters, Macrobond and the Ministry of Finance.

Table 2 Key figures in the National Budget and Government Pension Fund in BNOK.
	2025	2026	2027
Total revenue	2,290.1	2,455.2	2,328.5
1          Revenue from petroleum activities	692.7	706.1	603.4
1.1 Ordinary and special taxes	382.9	389.1	358.9
1.2 Other petroleum revenue	309.8	317.0	244.5
2          Revenue other than petroleum revenue	1,597.4	1,749.1	1,725.1
2.1 Ordinary and special taxes from mainland Norway	1,416.4	1,591.6	1,560.4
2.2 Other revenue	181.0	157.5	164.6
Total expenses	2,101.8	2,239.4	2,321.8
1          Expenses related to petroleum activities	28.7	35.5	35.0
2          Expenses not related to petroleum activities	2,073.1	2,203.9	2,286.8
Profit in the National Budget before transferral to the Government Pension Fund Global	188.3	215.8	6.7
-           Net cash flow from petroleum activities	664.0	670.6	568.4
=          Non-oil profit	-475.7	-454.8	-561.7
+          Transferred from the Government Pension Fund Global	480.2	454.8	561.7
=          Profit in the National Budget	4.5	0.0	0.0
+          Net allocations in the Government Pension Fund Global	183.8	215.8	6.7
+          Interest and dividend income, etc., in the Government Pension Fund1	462.5	460.2	515.0
-           Transfer from the Government Pension Fund Norway	11.7	12.3	13.4
=          Total profit in the National Budget and Government Pension Fund1	639.1	663.7	508.3
Memo:
Interest and dividend income, etc., in the Government Pension Fund Global	444.4	440.1	493.7
Market value of the Government Pension Fund Global2	19,735	21,258	22,400
Market value of the Government Pension Fund2	20,116	21,675	22,847
National Insurance Scheme’s obligations towards old age pensions3	10,765	11,423	11,496
Structural non-oil fiscal deficit, fixed value of NOK in 2027	545.7	603.5	608.4
Structural non-oil fiscal deficit (running prices)	507.4	583.4	608.4
Percentage of the Government Pension Fund Global	2.6	2.7	2.7
Percentage of trend GDP for mainland Norway	11.6	12.7	12.6
Change from previous year as percentage points (budget indicator)4	1.8	1.1	0.0
Estimated contribution from the budget proposal for GDP for mainland Norway in 2027, %5			0.1-0.2
Real, underlying increase in expenditure, %	4.1	2.7	0.2

¹ Does not include exchange gains or losses.

² At the beginning of the year. The value of the fund is computationally estimated to be NOK 22,400 billion at the beginning of 2027. This is around NOK 1,100 billion higher than at the beginning of 2026.

³ The present value of already earned rights to future old age pension payments in the National Insurance Scheme.

⁴ Positive figures may indicate that the budget has an expansionary effect. The indicator does not take into consideration that different income and expense items can have a different impact on activity in the economy. The budget indicator for 2027 is -0.04.

⁵ Based on calculations using the KVARTS and NORA macro models which, among other things, take into consideration that different income and expenses affect activity in the economy differently. The calculations are based on the whole of the public administration, i.e., local government administration and government administration.

Sources: The Ministry of Finance and Statistics Norway.