The collapse in oil prices in the past year has derailed the economy of almost every oil-dependent country.
All apart from Norway.
Its rainy day oil fund has now grown to 200% of gross domestic product, which means the government can now raid the huge piggy bank it started paying into in 1990.
Unlike the rest of Europe, Norway can comfortably counter its stalling economic growth with loads of government spending. Its its most recent budget the government said it would cut corporate to 22% and boost infrastructure spending by about NOK4 billion (£320 million) to boost job creation.
The most surprising statistic, according to HSBC analyst James Pomery, is that the government can do all this and only spend 2.8% of the fund’s $US1 trillion (£650 million) value. That’s less than the fund’s 4% annual growth rate, so it’s really just spending the interest.
It creates a strange fiscal environment for Norway, that’s really quite different to any other country except maybe Saudi Arabia. Norway has the biggest government surplus in the world:
The oil fund is doing its job.
Here’s Pomery (emphasis ours):
The fund was “designed to shield the economy from fluctuations in the oil price, give room for manoeuvre on fiscal policy and to support an ageing population and/or a drop in oil revenues. To an extent, that time is now.”