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Gov cuts oil spending in farewell budget

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Gov cuts oil spending in farewell budget
Outgoing Finance Minister Sigbjørn Johansen speaks to reporters after presenting the budget - Labour Party
08:07 CEST+02:00
Norway's outgoing centre-left government presented a budget on Monday that trims the use of funds from its massive oil wealth as it seeks to cool down the economy.
The budget proposal -- which foresees a 327.6 billion Norwegian kroner ($54.6 billion, 40.3 billion euros) surplus worth 10.6 percent of annual economic output -- is expected to be substantially revised in the coming weeks after the new government takes office.
 
The centre-left coalition led by Jens Stoltenberg hands over power Wednesday to a right-wing coalition following an election defeat on September 9.
   
The new government may choose to inject more of Norway's petrol wealth into the economy.
   
The state can use up to 4 percent of the value of its sovereign wealth fund -- the estimated average return on the investment of the oil revenue -- to top
up its budget.
   
However the outgoing government has proposed to spend only 2.9 percent in 2014, arguing that it's necessary to cool down the economy, keep inflation in
check and boost competitiveness.
   
In absolute terms this would represent an injection of 135 billion Norwegian krone --- 54 billion less than the maximum allowed.
   
The right-wing coalition led by Erna Solberg may want more petrodollars to finance election promises including tax cuts and increased public expenditure,
particularly on infrastructure.
   
The Stoltenberg government has lowered its growth forecasts for the year ahead to 2.2 percent (down from 2.6 percent) not including the oil industry and shipping.
 
In 2014, mainland growth is expected to reach 2.7 percent according to the budget proposal.
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