Norway’s government said it will make use of the oil fund for the first time ever in order to prop up the sluggish economy. In February, Norway’s central bank reported it will have to spend around $10 billion from the fund’s money to cover current expenses. Earlier, the government assumed it would take only $570 million from the fund for the whole year.
Norway has sharply increased its annual government spending in the wake of 70% drop in oil prices since mid-2014. The major wealth fund of the country is the Government Pension Fund Global and it is meant to accumulate the revenue from oil and gas industry to take care of future generations. The fund’s money is invested abroad in stocks, bonds, and real estate.
In 2008, the inflows in Norway’s pension fund amounted to over $90 billion. Despite consistently plunging oil prices, the fund managed to generate $3 billion in revenue in 2015. Today it faces the first loss in many decades.
At the moment, Norway’s economy is on the verge of recession. In the fourth quarter of 2015, Norway’s GDP grew marginally by 0.1% after staying flat in the third quarter. Following the data, one of the largest banks, Nordea, voiced concerns about the looming risks of recession.
Governor of Norges Bank Oeystein Olsen suggested depreciating the national currency. According to the central bank’s estimates, cutting its benchmark interest rate will be a sufficient measure to survive the oil crisis.
