Norway runs deficit for first time in over 20 years

For the first time since the mid 1990s, Norway's expenditures have exceeded state revenues.

Norway runs deficit for first time in over 20 years
The deficit was caused by an eight percent increase in expenditures. Photo: NTB Scanpix
Figures released by Statistics Norway (SSB) on Tuesday show that the state’s total revenues in the second quarter of this year totaled 328 billion kroner, which is 2.3 percent less than in the same quarter of last year.
Expenditures increased by eight percent over the same period last year, rising to 333 billion kroner. That gave Norway a deficit of around five billion kroner in the second quarter of 2016. 
“Reduced income from petroleum taxes and reduced surplus from the State’s Direct Financial Interest in petroleum activities (SDFI) account largely for the continued decrease in total revenue in Q2 2016,” SSB wrote. 
“Tax revenue from petroleum has halved from 46 billion kroner in the second quarter of 2015 to 23 billion kroner in Q2 2016. Total tax revenues have been reduced by 8.3 percent,” the agency continued. 
The second quarter deficit marked the first time since the early 1990s that expenditures outpaced revenue. 
Chart: Statistics Norway

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Norwegian economy back to pre-pandemic levels

The Norwegian economy has bounced back to pre-pandemic levels following the government’s strategy to lift Covid measures and reopen society, Statistics Norway said Friday. 

Norwegian economy back to pre-pandemic levels
The Norwegian economy has bounced back to pre-pandemic levels. Photo by pichet wong from Pexels

Norway’s economy has returned to pre-pandemic levels following a 0.7 growth in June when measured by gross domestic product (GDP), statistics Norway announced on Friday. 

“It is a milestone in the completely unusual period the Norwegian economy has been in since March 2020,” Pål Sletten, head of national accounts at the data collection firm, said in a report.

Between the first and second quarters, Norway’s mainland GDP, when excluding oil and foreign shipping, increased by 1.4 percent. 

Statistics Norway believes that this is a sign that Norway is over the worst of the economic impact that Covid-19 has had on the country. 

Some economists, such as Kjersti Haugland, chief economist at financial services group DNB, expected slightly more substantial growth overall but agreed that the progress was a milestone for the Norwegian economy.  

“It shows that recovery is in full swing in the Norwegian economy,” the economist told public broadcaster NRK.

The Norwegian Confederation of Trade Unions has also welcomed the news and hopes that coronavirus measures being eased would help more companies bounce back and get more employees back to work.

“When we have relaxed the infection control measures, we expect and hope that consumers will be in place and that the companies will pick up the laid off and get the activity going again,” Roger Bjørnstad, chief economist at LO, told NRK. 

As a result of the economic growth, it is now expected that historically low interest rates will rise as early as September. 

“The second quarter has been stronger than Norges Bank has assumed. So in this sense, current figures are something that supports Norges Bank being able to start raising interest rates in September,” Haugland said. 

Higher interest rates would signal more expensive mortgage repayments for those entering the property market in the future and for those with flexible interest rate mortgages.