Norwegian Ministry of Finance has released selected key figures ahead of the launch of the Revised National Budget at 10:45 a.m. The ministry stated that the Norwegian economy is still high, despite the slowing growth, and employment and output are stronger than projected in the National Budget last year. Moreover, wage and price growth are substantially higher than expected.
However, higher price growth than anticipated in the National Budget 2023 last autumn has made the original budget more contractionary than intended at the time. To ensure stability and predictability in essential welfare services, the already announced compensation for the unexpected price and wage growth will be implemented.
The ongoing war in Ukraine and its repercussions require political action. The Nansen Support Programme for Ukraine, refugee-related expenditure, and increased aid to developing countries that are severely affected by the war are necessary measures, which are also costly.
The government has proposed to increase the structural non-oil fiscal deficit by NOK 56 billion compared to the original budget to NOK 372.6 billion. As a share of GDP for the mainland economy (non-oil GDP), the structural deficit will increase by 0.4 percentage points from 2022 to 2023. The revised budget will increase GDP for mainland Norway by 0.3-0.4 per cent in 2023.
The structural non-oil fiscal deficit corresponds to 3.0 per cent of the Government Pension Fund Global (GPFG) at the beginning of the year. While the original budget was estimated to have an approximately neutral effect on the economy, model calculations indicate that the revised budget will increase GDP for mainland Norway by 0.3-0.4 per cent in 2023.
The ministry also shared some key figures, including mainland Norway’s gross domestic product in 2022 at 3.8 per cent, and 1.0 per cent in 2023. Employment is expected to decrease from 3.9 per cent in 2022 to 0.8 per cent in 2023. The registered unemployment rate will remain at 1.8 per cent, and the structural non-oil fiscal deficit will be NOK 372.6 billion.
The Ministry of Finance used macro models KVARTS and NORA to estimate the contribution of fiscal policy to growth in GDP for mainland Norway, which is expected to be 0.3-0.4 per cent. The models also considered that different revenues and expenditure items might differ in their impact on economic activity.
The detailed forecasts will be published in the Revised Budget, while the Ministry of Finance published selected key figures prior to the launch to ensure equal access to information that might be market sensitive.