Nova workboard

a blog from young economists at Nova SBE

Will the results of the parliamentary elections in Norway open for more use of the Norwegian oil funds?

For the porpoise of not spending all of their income from their petroleum industry, and not to create imbalance in the Norwegian economy, Norway have created some rules for how to spend and invest the gains. All the oil income is put in to an international fund. The money is supposed to gradually be put into the country for the porpoise of smoothing out fluctuations in the economy. One of the rules is that the spending is not allowed to exceed the expected real rate of return from the fund, which is estimated to be 4 % of the fund capital at the beginning of the budget year.

 

On Monday the September 9th, the parliamentary elections were held in Norway. The right-of-center coalition was the winners with the two biggest parties being the Conservative Party and the Progress Party. The Progress Party has in recent years had an aggressive financial policy, and has expressed the interest in spending more of the oil fund. The Conservative Party has on the other hand guaranteed that the rules of the spending will be followed. For the next couple of weeks the negotiations between the coalition parties will begin. They will have to discuss which politics the new government is going to practice. If the Progress Party manages to win through with their policy of a more aggressive spending of the oil fund, how will this affect the economy? One of the main objectives for the government will always be to keep the unemployment rate low, especially for an economy which is very depended on one resource, and in that way stimulate growth. With increased use of oil income the government will be more able to invest in infrastructure, education, research etc., or use tax cuts to secure this sustained growth. Though this is tempting, they have to be careful so that the investments and spending does not overheat the Norwegian economy and create imbalance and unwanted increase in prices.

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Author: studentnovasbe

Master student in Nova Sbe

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