Norway sovereign wealth fund returns on downward trend
- Norway faces most severe oil and gas price slump in 30 years, government says

The returns on Norway's sovereign wealth fund, also known as its state pension fund, will most likely face a downward trend when measured against the share of output from the mainland's economy, the Norwegian government said Thursday.

According to the country's National Budget for 2018, the government said that faced with the most severe oil and gas price slump in 30 years, it has over the last few years actively used fiscal policy to counter unemployment.

"This has worked as intended," it noted.

The value of Norway's sovereign wealth fund, the world's biggest, hit a record high of $1 trillion in September.

It said the fund, which is fed by oil sales, would see a downward trend because growth in the fund's capital cannot keep pace with growth in the mainland economy.

However, the government said that despite low interest rates and lower oil prices, it reduced unemployment in the country.

The budget showed that the petroleum industry will remain important for the Norwegian economy for years to come, but will provide less of a growth impetus than before, according to the National Budget 2018.

"Hence, new growth in other industries needs to be promoted. The petroleum industry has itself been leading the way on structural adjustment, and is now delivering profits at a much lower oil price than it was capable of only a few years ago," it noted and added, "The last few decades have been a golden period for the Norwegian economy, as well as for Norwegian public finances. Key economic trends have worked in our favor."

It stressed that the tide is now turning, the pension fund will not continue to grow at the same rate and returns are expected to be lower than before amid expectations that oil prices will not regain its former peaks.

- Longer time at jobs crucial

The government specified that skills building to enable more people to participate in the economic life of the country is needed, and also to allow more people to stay on in jobs for longer.

"After several years of steep increases in petroleum revenue spending, the outlook for the Norwegian economy suggests a fiscal policy normalization in 2018, for example a neutral fiscal policy stance," it said and added, "Petroleum revenue spending is estimated to correspond to 2.9 percent of the capital of the fund, the same level as for the current year, and below the expected real return of the fund."

"All in all, the value of the fund is no longer expected to increase as a portion of output in the mainland economy. Consequently, the scope for further expansion of petroleum revenue spending is limited," it said.

Norway, Europe’s largest oil producer and the world’s third-largest natural gas exporter after Russia and Qatar, holds the world's biggest fund.

The fund, as of December 2016, invested in 48 different Turkish companies, and totaled almost $1 billion.

By Murat Temizer

Anadolu Agency

12 Oct,2017