OSLO (Reuters) -Norway’s centre-left government said on Thursday it plans to spend an extra 56 billion Norwegian crowns ($5.3 billion) from its sovereign wealth fund in 2023 to compensate for soaring inflation and pay for aid to Ukraine.
Cash spending from the $1.4 trillion fund is now expected to reach 372.6 billion crowns this year, up from 316.8 billion originally planned last October, the government’s revised budget showed.
The finance ministry warned in February it had underestimated the impact of price increases in its original spending plan, and parliament the same month also promised to sharply increase its funding of Ukraine’s war effort.
“Higher price growth than expected in the national budget 2023 last autumn has meant that the original budget has become more contractionary than intended at the time,” the finance ministry said in a statement.
Norway, a major oil and gas exporter, cut its forecast for net income from the petroleum sector this year by 360 billion Norwegian crowns ($34.3 billion) to 1.02 trillion crowns compared to its October forecast, as prices have fallen.
In 2022 it earned 1.29 trillion from the oil industry.
The fiscal budget will spend an estimated 3.0% of the sovereign wealth fund in 2023, compared to 2.5% seen in the October budget, the government’s forecast showed, and also above the Norwegian central bank’s latest forecast of 2.8%.
“The budget is marginally more expansive than Norges Bank’s estimates,” Handelsbanken said in a note, adding that this could push interest rates higher than the central bank has so far predicted.
The so-called budget impulse, which measures the spending plan’s impact on economic growth, is now anticipated to be positive in a range of 0.3 to 0.4 percentage points in 2023, up from minus 0.6 points seen previously.
($1 = 10.4882 Norwegian crowns)
(Reporting by Victoria Klesty, editing by Terje Solsvik, Toby Chopra and Christina Fincher)