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[OSLO] Norway will spend more than expected of its saved-up oil wealth this year as its contracting offshore energy sector cuts into growth, eroding consumer confidence and boosting unemployment, the government said on Tuesday.
With oil prices tumbling, energy companies, which generate a fifth of Norway's income, will cut investment spending by 13.1 per cent this year, more than forecast earlier, and tax revenue will fall sharply, reducing the government's overall surplus, according to revised budget documents seen by Reuters.
The finance ministry will release its revised 2015 budget, which also includes some 2016 forecasts for the first time, at 0845 GMT.
Documents obtained by Reuters indicate that AAA-rated Norway plans to use 168.8 billion crowns (US$22.4 billion) of its oil income in the budget, up from a previous plan for 163.7 billion crowns, while the overall budget surplus will shrink to 7.7 per cent of GDP from a previous forecast for 11.7 per cent.
Norway has saved up US$890 billion in a rainy day wealth fund and uses just a small portion of this saving in the budget, maintaining the fund as a kind of endowment for the country.
The actual spending will equal 2.6 per cent of the fund this year, below a previous 3 per cent estimate, but the fall is due to the rise in stocks and the weakening of the crown, not a cut in spending.
GDP growth on the mainland, excluding the offshore oil sector, will slow to 1.3 per cent this year, down from an October projection for 2.0 percent and below last year's 2.3 per cent.
But growth could rebound next year, the government said, predicting a 2.0 per cent rate for 2016 as oil prices are forecast to rise.
Unemployment, which hit a ten-year high earlier this year, is seen averaging 4.0 per cent in 2015, above a previous forecast for 3.6 per cent.
The price of oil, the budget's main source of income, is now seen averaging 480 crowns (US$63.7) a barrel this year, below a previous forecast for 650 crowns but is forecast to rise to 529 crowns in 2016.