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Norway’s giant wealth fund earns $111 billion in first half of 2021

Norway's sovereign wealth fund, the world's biggest, said Wednesday it earned more than $100 billion in the first half of the year thanks to a soaring stock market -- and a small assist from an erroneous purchase that luckily turned into a gain.

Published: 19 August 2021 10:19 CEST

Norway's giant wealth fund earns $111 billion in first half of 2021

Norway's oil fund has made sizeable returns in the first half of this year. Photo by Jan-Rune Smenes Reite from Pexels

The oil-rich country launched the fund in the 1990s to protect the economy from the volatility of crude prices and finance the future needs of Norway’s generous welfare state.

Its value reached 11.7 trillion Norwegian kroner ($1.3 trillion, 1.1 trillion euros) at the end of June, with three-quarters of its investment in
global equities.

The fund posted a 9.4 percent return, or 990 billion kroner ($111 billion, 94.7 billion euros), in the first six months of the year.

The head of the fund, Nicolai Tangen, said the energy, finance, health and technology sectors drove the gains.

READ MORE: Norway taps oil wealth to cushion Covid impact

A small fraction — 582 million kroner — was made after a trader mistakenly bought more shares than planned of an unidentified company.

“The consequence this time was that it was beneficial to us,” the fund’s number two, Trond Grande, told Norway’s NTB news agency. “But we could very well have suffered a loss on that.”

The wealth fund is an essential source of funding for the government, with around every fifth kroner of government spending coming from the oil fund. If you want to learn more about how the oil fund has transformed Norway, check out our article here.

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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.

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