OSLO: The fall in oil prices from record high levels above USD 100 a barrel to just around USD 60 has fueled fears of economic contraction, higher unemployment and lower wage growth.
Norway’s state revenue and fiscal policy has been largely based on the use of petroleum revenues. Oil wealth expenditure in 2015 will reach a record 6.4 percent of Norway’s mainland economy, compared to 5.8 percent in 2014.
Norway’s economy is “very vulnerable” due to the falling oil prices, but the government is taking appropriate measure to guarantee that the current crisis doesn’t harm the economy in the long term, Prime Minister Erna Solberg told reporters.
“The government is following the economic situation closely, in case we have to take new measures to make sure that short-term growth swings don’t lead to changes so big that they come at the expense of Norway’s long-term development,” Solberg said during a press conference in Oslo.
Both preliminary oil output and natural gas production fell in Norway in November, the Norwegian Petroleum Directorate (NPD) said Wednesday. Oil production in November was about 5 percent below the NPD’s projection and 5 percent lower than the oil production in November last year.
The Conservative-led government has not proposed modifications to the current tax levels imposed on the oil and gas sector, where an additional 51 percent income tax rate applies to make the effective rate 78 percent.
Instead, the current right-wing government, made up of the Conservative and Progress parties, has proposed tax reform measures that would significantly alter the distribution of Norway’s tax revenues. The measure, that would see the tax burden moved from corporate and personal income toward taxes on consumption and property, has been criticized by left-leaning opposition parties.
The center-right minority government has been widely criticised for reducing welfare spending, such as benefits to the families of disabled children, while slashing the wealth tax.
According to a poll published earlier this month by public broadcaster NRK, Prime Minister Solberg’s Conservatives party experienced a drop in public support falling by 2.3 percentage points to 21.5 percent.