By Kjetil Malkenes Hovland
OSLO--The finance minister of Norway, Western Europe's biggest
oil producer, said on Friday that she would sanction extra fiscal
stimulus if the economic outlook were to worsen further but for now
her budget plan for 2015 still holds despite the rapid drop in
crude prices.
Norway's oil revenues have been hit hard by a 50% drop in prices
over the past six months and oil companies operating in Norway are
set to reduce their capital expenditure by 15% on the year in 2015,
the government's petroleum directorate said in a report on
Thursday. About 1 in 11 workers in Norway are employed by
businesses exposed to the oil sector.Siv Jensen
After consultations with the head of the central bank and the
prime minister on Friday--described as a "crisis meeting" in local
media--Finance Minister Siv Jensen sought to downplay the need for
the government to act now to support the economy.
"Some are quick to use the word crisis. I want to underline that
this is not a crisis," she said. Ms. Jensen said monetary policy
and the exchange rate had proven to be useful "shock absorbers" for
the economy so far, as had the country's sovereign-wealth fund and
solid banking sector.
She said Norway's unemployment was low, its employment rate was
high and the economy was growing. "This is a good starting point
for an economy facing an adjustment," she said.
Concerns have been rising that the country could be in for a
hard landing after years of healthy growth and rising levels of
prosperity. Analysts had wondered ahead of the meeting on Friday
whether the government might launch new measures to support the
economy, such as investments in infrastructure projects.
"If the situation gets worse, we are ready to present the
measures that are needed, for now we think the budget is well
suited to the situation, " Ms. Jensen said.
The budget for this year included plans to spend more of
Norway's oil money, which it keeps in the world's largest
sovereign-wealth fund, as well as a cut on a tax on wealth.
Norway's main defense against the slump in oil has so far been
monetary policy, and a lower oil price was cited by the central
bank when it lowered its main interest rate to 1.25% in December,
and signaled a 50% chance of another cut within six months.
As the oil price has fallen, the Norwegian krone has weakened to
around 7.60 kroner to the dollar from 6.10 kroner last summer which
has helped the competitiveness of Norway's big exporters such as
the fertilizer producer Yara and aluminum producer Norsk Hydro.
Write to Kjetil Malkenes Hovland at
kjetilmalkenes.hovland@wsj.com
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