OSLO (Reuters) – Norway’s centre-left government said on Thursday it plans to spend an extra 56 billion Norwegian crowns ($5.3 billion) from its sovereign wealth fund in 2023 to compensate for soaring inflation and pay for aid to Ukraine.
Cash spending from the $1.4 trillion sovereign wealth fund is now expected to reach 372.6 billion crowns this year, up from 316.8 billion originally planned last October, the government’s revised budget showed.
The finance ministry warned already in February it had underestimated the impact of price increases in its original spending plan, and parliament the same month also promised to sharply up its funding of Ukraine’s war effort.
“Higher price growth than expected in the national budget 2023 last autumn has meant that the original budget has become more contractionary than intended at the time,” the finance ministry said in a statement.
The increased spending will compensate for unexpected price and wage growth, ensuring stability and predictability in essential welfare services, it added.
The fiscal budget will spend an estimated 3.0% of the sovereign wealth fund in 2023, compared to 2.5% seen in the October budget, the government’s forecast showed.
That is above the Norwegian central bank’s latest forecast of 2.8%. Norges bank will present a new set of forecasts for Norway’s economy on June 22.
The so-called budget impulse, which measures the spending plan’s impact on economic growth, is now anticipated to be positive in a range of 0.3 to 0.4 percentage points in 2023, up from minus 0.6 points seen in the autumn’s budget.
The mainland economy is now expected to grow by 1% in 2023, an upwards revision of its March forecast for 0.9% growth.
($1 = 10.4882 Norwegian crowns)
(Reporting by Victoria Klesty, editing by Terje Solsvik and Toby Chopra)
