Oil-rich Norway to cut spending, reduce reliance on oil and gas revenues in 2011 budget

Oil-rich Norway to tighten spending

OSLO, Norway — Norway on Tuesday unveiled next year’s budget plans aimed at curbing expenditure after the oil-rich country recovers from an economic downturn with a slightly upturned outlook for 2011.

The Finance Ministry proposed to cut excess spending from oil and gas proceeds to 7.4 billion kroner ($1.2 billion; euro880 million) — from 19 billion kroner this year.

The budget proposal presented to Parliament predicts that Norway’s economy will grow 1.7 percent this year and 3.1 percent in 2011 — a slight increase on earlier estimates.

After a downturn in late 2008 and through 2009, Norway’s economy “has performed better than most other industrialized countries during the financial crisis,” the ministry said, but cautioned that improvement has been “somewhat weaker than expected” this year.

A more positive outlook and developments during the past few months mean a projected unemployment rate of 3.5 percent in 2010 and 2011 — below a 20-year average of 4.2 per cent, it said. Inflation will be 2.5 percent this year, falling to 1.8 percent in 2011.

The government said that next year’s fiscal budget deficit — not counting oil and gas — is estimated at 135 billion kroner.

Norway, a country of 4.8 million, is the world’s seventh largest oil exporter. Petroleum revenues are expected to reach 288 billion kroner this year, growing to 313 billion kroner in 2011.

Each year the government puts surplus revenues in a sovereign wealth fund managed by the central bank. The oil wealth has allowed the Nordic country, whose cradle-to-grave welfare system is among the most extensive — and expensive — in Europe, to escape the financial crisis largely unscathed.