NORWAY – The Norwegian finance ministry has lowered its forecast for the size of the Petroleum Fund at the end of this year by 30 billion crowns (3.8 billion euros).
“The total capital of the Fund at the end of 2003 is estimated at 816 billion crowns, approximating 51% of gross domestic product,” said the ministry in its revised 2003 budget released today.
The original budget, released in October last year, estimated that the fund would increase to 846 billion crowns by the end of 2003.
“The capital of the Petroleum Fund at year-end 2002 was significantly lower than previously estimated, as a result of weak equity markets and the appreciation of the Norwegian crown,” the ministry says.
The Petroleum Fund’s returns fell 4.7% in 2002, taking its value to 609.0 billion crowns (78.7 billion euros) - although it returned 2.8% in the fourth quarter of the year.
The fund was also expected to have a lower surplus in 2003 compared to 2002. The government expects a 128.8 billion crown (16.4 billion euro) surplus this year, against a 138.4 billion crown surplus last year.
The revisions to the budget were aimed at creating a “neutral fiscal stance” – key when Norway is facing higher unemployment and what the budget calls “slack” in the economy.
“Given the revisions in the revised budget, it may take longer time to return to a path where the fiscal stance is in strict accordance with the expected real return on the Petroleum Fund,” the ministry said.
“Lower wage growth and a neutral fiscal stance will pave the way for lower interest rates and a reversal of the strong Krone exchange rate,” said finance minister Per-Kristian Foss.