Norway proposes reduced oil fund spending in revised national budget

The Norwegian government on Tuesday presented its revised national budget, cutting oil fund spending by nearly 5 billion kroner (€430 million) compared to the original plan, Dagbladet reports.

Oil-fund withdrawals for 2026 are now set at 579 billion kroner, down from the previously approved 583.9 billion kroner. The withdrawal rate from the Government Pension Fund Global will be 2.7 percent of its value, slightly below the 2.8 percent initially projected.

“This revised budget safeguards the country, our shared society, and people’s finances,” the government stated, noting that Norway remains well-positioned despite global uncertainty. Economic activity is expected to stay strong due to low unemployment, job growth, and real wage increases, though inflation and interest rate pressures have led to a slight downgrade in growth forecasts.

Mainland GDP growth is now estimated at 1.7 percent for 2026—close to normal levels—while inflation is projected at 3.5 percent, up from the previous 2.2 percent estimate. The structural, oil-adjusted budget deficit will represent 0.9 percent of mainland trend GDP, down from 1.8 percent.

Economists warn against excessive spending

The budget follows last week’s interest rate hike by Norges Bank, which raised rates by 0.25 percentage points. Economists had cautioned that high oil fund spending could keep interest rates elevated.

“Less government spending means less pressure on interest rates,” said Kjersti Haugland, chief economist at DNB. Kyrre Knudsen of Sparebanken 1 Sør-Norge noted that the 2.7 percent withdrawal rate is well below the 3 percent fiscal rule, calling the approach “restrained.”

“The economy is performing well, with job growth and low unemployment,” Knudsen told Dagbladet. “To curb inflation, the government must limit oil spending. Cooling the economy is necessary to meet inflation targets, especially after strong wage settlements.”

Political negotiations ahead

Finance Minister Jens Stoltenberg (Labour) acknowledged that budget talks with coalition partners—including the Centre Party, Greens, Socialists, and Red Party—would be “demanding.” Key demands include:

• SV (Socialists): 1.25 billion kroner for improved staffing in schools and after-school programs.
• MDG (Greens): A national 499-krone monthly public transport pass (cost: ~3.5 billion kroner) and 1 billion kroner annually for voluntary forest conservation.

The government also confirmed it would again propose scrapping plans for a controversial Stad Ship Tunnel, allocating no funds for the project. An additional 10 billion kroner will go toward electricity subsidies under the “Norgespris” scheme.