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IPE special report May 2018

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Norway sees Petroleum Fund “challenges”

NORWAY – The central bank has acknowledged that there are “challenges” involved in managing the country’s 78.7 billion euro Petroleum Fund – and that there are demographic hurdles as well.

“Management of the Petroleum Fund poses challenges,” said the deputy governor of the Norges Bank, Jarle Bergo. “At the same time, there is a demographic challenge to be faced: the working population will decline sharply and the proportion receiving income from the public sector will rise.”

Bergo was speaking a conference in Kristiansand this week.

According to Norges Bank projections, Bergo said, the labour force will grow by around 150,000 by 2030, while old-age and disability pensioners will increase by around 500,000 in the same period.

“This means that the number of persons in the labour force relative to the number of pensioners will fall from 2.6 to 1.8,” Bergo says. The rise would result in a “sharp increase” in funds’ obligations.

“Expenditure on old-age and disability pensions is expected to double as a share of total gross domestic product in the course of the next 30 years.”

Bergo told the conference that the return on the Petroleum Fund – set up in 1990 to transfer Norway’s oil wealth into financial wealth – “will range between 4%-5% of GDP when the bulk of our oil resources have been extracted and converted into financial wealth”.

The Petroleum Fund’s returns fell 4.7% in 2002, taking its value to 609.0 billion crowns (78.7 billion euros).

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