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Norway dips into its reserves of GPF for the first time - TDS

FXStreet (Delhi) – James Rossiter, Research Analyst at TDS, notes that for 2016, Norwegian government expect to dip into the Global Pension Fund by just NOK 3.7bn in order to meet planned spending.

Key Quotes

“Norway’s Budget 2016 shows a stimulative fiscal plan to help boost the weakening economy. Lower oil prices are leaving their mark on the country, with energy-sector production falling from almost 24% of output in early 2014 to under 20% of output by mid -2015. This decline has left headline GDP relatively flat in 2015H1, with the first possible signs of a mild recession showing up in the 0.4% decline in 15Q2 GDP.”

“It shows that overall for 2015, the Norwegian government does not expect to dip into the NOK 7 tn Global Pension Fund, but will instead use the majority of revenues from petroleum activities to fund the deficit— contributions to the fund will fall from NOK 156bn in 2014 to just NOK 38bn in 2015.”

“We are less certain, at this stage, what the flow effects of this fiscal policy shift may be on NOK. The fund withdrawal in 2016 may imply that it could increase its pace of purchases of NOK in the FX market as it repatriates foreign assets. Currently, these are running at a rate of NOK 700 mn per day.”

“While the budgetary policies announced today should help boost activity going forward, we don’t see this as an explicit transfer of economic policy from the Norges Bank to the government. Instead, we see this as a small complement to the Norges Bank’s existing policy, and as such, we remain comfortable with our call for one more Norges Bank cut by the end of the year.”

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