Norway slashes growth forecast on oil slowdown

Norway slashes growth forecast on oil slowdown
Norwegian finance minister Siv Jensen presents her revised budget on Wednesday. Photo: Berit Roald / NTB scanpix
Norway's government on Wednesday slashed its growth forecast for this year, citing a slowdown in spending by the key oil sector in the Nordic country.
In a revised budget the government said the Norwegian economy is now forecast to grow by 1.9 percent in 2014, compared to the 2.5-percent increase expected in the original budget submitted last November.
This forecast concerns the country's "mainland" GDP, which leaves out fossil fuels and maritime transport and is preferred as an indicator in Norway
since it excludes the strong cyclical variations related to oil, one of the country's main exports.
However the purchase by the oil sector of goods and services is included in the country's "mainland" GDP calculation, and the finance ministry expects this to stabilise then decrease.
"Several factors converge to create a slowdown in the Norwegian economy for the coming years," the finance ministry said.
Finance Minister Siv Jensen cited high costs and salaries, slower productivity growth and high household debt as other factors contributing to increasing slack in the economy.
In 2015, growth should rise to 2.2 percent, but unemployment is expected to increase from the current 3.5 percent to 3.75 percent, according to the government. 
The government also proposed to spend 1.9 billion kroner ($320 million, 230 million euros) more of the country's oil revenue which is traditionally
transferred to the nation's giant pension fund.
Under Norwegian rules the government has the right to tap up to four percent of the fund to balance the budget, but during 2014 it intends to use just 2.8 percent.
When oil revenue is included, Norway's budget surplus amounts to 10.8 percent of GDP.

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