Stripping out revenue from oil, gas and shipping, the Norwegian economy is now forecast to grow by 2.6 percent instead of the 2.9 percent stated in October's budget report.
Total GDP will grow 1.4 percent, versus a 2.5 percent prediction seven months ago
"Norway is doing well but we have to be prepared if the turmoil in Europe hits us at a later stage," Finance Minister Sigbjoern Johnsen said when presenting the country's revised annual budget.
Unemployment was also seen worsening, to 3.4 percent from 3.2 percent, which would still be one of the lowest rates in the world.
The oil-rich Scandinavian country is often described as having a two-tiered economy, with its thriving oil sector outshining other industries, where rising costs and slowing markets are weighing on profits.
To that end, on Sunday the government proposed reducing the corporate tax rate to 27 percent from 28 percent while raising the rate on oil companies, and closing loopholes used by international companies to avoid paying tax.
Norway traditionally pours most of its oil revenue into its pension fund, which over the years has become the largest of its kind.
The government expects to use 3.3 percent of its oil and gas income this year to prevent posting a deficit, less than the four percent it's allowed to use.
If the pension fund's performance is included, the 2013 budget is expected to show a surplus of 355.1 billion kroner (46.4 billion euros or $60.9 billion).
Norway's centre-left coalition has been in power since 2005 but is facing headwinds ahead of general elections set to be held on September 9th, with polls predicting a win for the right-wing opposition.