NORWAY - Norwegian finance officials are predicting the Norway Pension Fund - Global will increase its market value by over 14% this year, having now pulled its assets back up to the level achieved by the end of 2007.
Figures released by Norges Bank, the Norwegian Central bank responsible for the management of the overseas pension fund, show assets within Europe's largest pension fund have rallied after a four-month decline, and leapt 3.6% between March and April, rising from NOK1.947trn (€250bn) by the end of March to NOK2.017trn.
More importantly, having revealed the current value of the global pension fund deposits, the revised Norwegian National Budget 2008 suggests the value of the entire pension fund will rise to NOK 2.427trn - up from just under NOK2.017trn by December 31, 2007 - and the Pension Fund Global will account for NOK 2.316trn by the end of the year.
Finance ministry officials suggest in the revised budget document while there are signs of slowing growth across the rest of the economy, the oil price "has increased significantly since the National Budget 2008 was presented in October 2007".
Whereas a barrel of oil was said to be worth NOK360 a barrel in October, under the government's earlier projection, its 2008 budget now suggests Norwegian oil will be priced NOK500 a barrel in 2008.
As a result of the rising oil price, the government said the "non-oil deficit of NOK73.9bn" will be NOK7bn lower than the expected real return on the pension fund, indicating the money contributed by the public purse will be lower than that generated by pension fund returns.
"Over time, the structural non-oil central government budget deficit shall correspond to the expected real return of the Government Pension Fund - Global, estimated at 4%. However, fiscal policy must take into account business cycle fluctuations around the medium-term path," said a statement from the finance ministry.
The budget document reveals there is a non-oil fiscal deficit of NOK13bn, but the price of oil has been so strong this is NOK23.4bn lower than originally predicted.
Moreover, "central government net cash flow from petroleum activities of NOK356bn" is almost NOK54bn higher than estimated in the earlier budget proposals, on the back of the rising oil price, so NOK 343bn is being transferred this year into the Government Pension Fund - Global.
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