– We have come up in a use of oil money that is 6-7 percent of GDP for mainland Norway. There is a lot and it should be enough, says Olsen said.
– My advice is: let us not stretch the elastic anymore. Let us show restraint and caution and restrain spending, he said.
Olsen held Thursday evening its annual speech on the state of the Norwegian economy and perspectives ahead.
There he took up the fiscal rule from 2001, which restricts the use of oil revenues from the state budget to 4 percent of the oil fund value.
– The guideline has served as a long-term guideline for fiscal policy in nearly 15 years. It earned purpose. Now it needs to stop, hit Olsen stuck in speech.
– A sensible adaptation to risk is that one does not aim to increase the use of oil revenues from the current level. The era of the escalation of the use of oil revenues may be behind us, he concluded.
– Clearer picture
The backdrop for these statements is an oil price has fallen from $ 115 a barrel last summer to below 60 dollars a day.
In addition, the situation bleak for the return of the fund or the Fund. This is because 35 percent of the fund is invested in bonds, which analysts believe interest rates will remain low for long.
– There are two new developments. One is considerable uncertainty associated with future oil revenues, which we must reckon with not being as high as we thought earlier. The second is considerable uncertainty around the return, which will be lower – perhaps under 3 percent, says Olsen.
– This picture appears as clearer now than it did a few years ago, he adds.
The use of oil money has increased gradually from 2001 until today, the last few years without 4 per cent limit is exceeded. That’s because the fund’s value has soared to the current level with an estimated value of over 6.600 billion. This year the government aims to spend 164 billion oil dollars.
Do not stretch the elastic
Olsen pointed in his speech that with oil prices at around $ 60 a barrel, which today can supply to fund a halt. With today’s oil spending may therefore be necessary to transfer money from the oil fund to the state budget rather than the opposite, he points out.
– Measured as a share of GDP, the fund may already have peaked, says Olsen.
He points out that it has always been clear that the Fund would flatten out when using ROI.
– What is new is that this issue may be relevant here and now.
The Governor stressed that it may go better than we think, but still recommend politicians to act now rather than waiting until it becomes more painful.
Olsen stressed in his speech that we must prepare ourselves for lower oil prices than we have been accustomed to in recent years.
– It would be unwise to rely on the oil price again will establish themselves at over 100 dollars a barrel, he said.
The fall in oil prices has “accelerated and intensified” an announced decrease in activity. Although oil era is not over, we must prepare ourselves for what comes after it.
– Norwegian economy must adapt to a clearly lower demand from the oil sector. We go from unique position to restructure, struck Governor firm. (© NTB)
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