Norway Is Plowing Cash Back Into Its Wealth Fund

(Bloomberg) -- Cash is once again flowing into the world’s biggest wealth fund.

Norway’s government on Monday proposed depositing 24 billion kroner ($2.9 billion) in the fund this year and 53 billion kroner next year, according to budget documents. It took out 64 billion kroner in 2017.

The $1 trillion fund, which owns about 1.4 percent of global stocks, is getting fresh cash after two years of withdrawals as crude prices have risen above $80 per barrel. The monthly cash infusions will free up the fund to make more real estate investments and allow it make new investments without having to pare its portfolio in other places.

Norway on Monday presented a neutral budget as the rise in oil prices stoke the economy of western Europe’s biggest petroleum producer. The government proposed spending 231 billion kroner of its oil income, which would be a neutral budget impulse. The spending amounts to 2.7 percent of the wealth fund, below the 3 percent fiscal spending rule.

“The cyclical downturn that followed the fall in oil prices four years ago has come to an end, and the economy is in a cyclical upturn,” the Finance Ministry said. “Economic growth is above its historical trend and is projected to increase further next year.”

More Key figures20182019
Mainland GDP2.3%2.7%
Unemployment3.8%3.7%
CPI-ATE1.3%1.8%
Oil Investments4.8%8.3%
Exports1.7%2.2%
Fiscal Impulse-0.1%0.0%
Struct. ex-Oil DeficitNOK226.7bNOK231.2b
Oil PriceNOK578NOK583
Net Oil Cash flowNOK259bNOK286b

The government made several tax changes, including lowering the corporate and base individual tax rate to 22 percent from 23 percent, while increasing marginal tax rates to make up for most of the drop in revenue. It also proposed cutting the wealth tax.

For the financial industry the changes were on the negative side. The government proposed lowering some deductions for pension and insurance companies, raising 3 billion kroner this year. It also kept the tax rate for banks at 25 percent and proposed to limit the ability of multinationals to reduce taxes by loading up on debt in Norwegian subsidiaries.

The minority government will now need to reach an agreement with the Christian Democrats to pass the spending plan. The leader of the Christian Democrats last month called on his party to end its support to the Conservative-led government. The party will convene on Nov. 2 to vote on the proposal to start talks on forming a government with the opposition parties.

©2018 Bloomberg L.P.