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By Bloomberg

Norway is ready to tap its oil wealth to stop the economy hemorrhaging jobs amid the deepest slump in crude prices since the financial crisis.

Prime Minister Erna Solberg is working on a budget proposal for next year backed by the country’s $875 billion sovereign wealth fund to help secure jobs and soften the downturn in western Europe’s largest oil and gas producer.

“Next year’s budget will be, even more than this year’s budget, focused on the transformation of the Norwegian economy, the competitiveness issues and on fighting unemployment,” Solberg said on Monday in an interview after speaking in Oslo.

While reiterating the government’s view that Norway is “not in a crisis,” Solberg faces a slowdown that threatens to destroy more jobs than were lost during the 2008 financial meltdown. The country is now bracing itself for the biggest slowdown in oil and gas investments since 2000 and petroleum companies have cut more than 20,000 jobs. Though still lower than elsewhere in Europe, Norwegian unemployment has grown to the highest level in at least 11 years.

Solberg’s Conservative-led government, now in its second year in office, already in May stepped up its record use of oil revenue. Back then, it predicted Norway’s mainland economy, which excludes oil and gas output, will grow 1.3 percent this year and 2 percent next year. But Brent crude has dropped almost 30 percent since those forecasts were made.

Brent was trading at about $49 a barrel on Tuesday, compared with a high of $115 in June last year. The krone sank as much as 0.6 percent against the dollar and traded at 8.2229 as of 2:48 p.m. in Oslo.

Oil Reliance

But unless there is an abrupt increase in unemployment, “we don’t expect to see any extraordinary measures in this year’s budget,” said Kjersti Haugland, an analyst at DNB ASA. “We don’t see the outlook for the Norwegian economy as grim enough to warrant” a large increase in stimulus from this year’s budget, she said.

Part of Solberg’s budget proposal will be based on a planned “tax reform” to make Norway more “investment- friendly,” Solberg said.

The economy has also had some help from the weakening krone, which has slid 9 percent against the euro in the past 12 months, helping the tourism and mainland exports.

But Norway will need more than just a weak currency to wean itself off its oil reliance, according to Solberg.

“For the long-term transformation of the Norwegian economy into having a broader base than primarily oil and gas, we will need different measures -- which we have already started,” she said.