Azernews.Az

By Bloomberg

Norway added to record spending of its oil revenue to cover budget needs as the nation grapples with slowing growth amid a decline in crude prices.

The minority coalition proposed tapping 168.8 billion kroner ($22 billion) of oil revenue, up from 164 billion kroner it estimated in October, according to a revised budget document obtained by Bloomberg. Expenditure will be a record 6.4 percent of the mainland economy, the same as estimated in October.

Norway Finance Minister Siv Jensen’s proposal comes after she repeatedly said the nation is not facing a crisis. Norway’s lost oil-industry jobs pushed unemployment to the highest level since the end of 2005.

“Lower demand from the petroleum sector will pose challenges to the Norwegian economy,” Jensen said. “Our economic policy helps the economy meet these challenges.”

The expansion in western Europe’s largest oil exporter has abated as offshore investments slow and lower oil prices threaten growth. That has been partly offset by a weakening krone, which lost its allure as a haven from the European debt crisis and has slid about 3.5 percent against the euro over the past year, helping exporters.

Norway’s mainland economy, which excludes oil and gas output, will grow 1.3 percent this year and 2 percent next year, according to the government. That compares with an October forecast for 2 percent growth in 2015.

Green Shift

Oil money spending will be equal to 2.6 percent of its sovereign wealth fund, the world’s biggest.

The government’s spending plans, which need backing from the smaller Liberals and Christian Democrats to pass in parliament, are well within the 4 percent limit of use of oil revenue. However, growth in the $900 billion fund means the cap represents a rising cash mound.

The Liberals signaled they will want changes in the budget, according to Terje Breivik, the party’s fiscal policy spokesman.

“For the Liberals to support such an expansionary fiscal policy, a greater part needs to be shifted from operations into investments and measures that stimulate to green growth,” he said in a statement.

The government predicted that unemployment will rise to 4.1 percent next year from 4 percent this year and that oil investments will decline 13 percent in 2015. Crude oil prices will average 480 kroner per barrel this year and 529 kroner next year, the government estimated.