OSLO (Reuters) - The Norwegian government plans to spend more of its oil revenues in 2013 than it has earmarked for this year, when it expects the economy to grow faster than earlier thought, a budget draft showed on Monday.
It also plans to nearly double its carbon taxes on the oil industry in 2013 and raise cash to help developing nations protect tropical forests as part of measures to combat climate change, the draft showed.
High oil prices and low interest rates have fuelled a boom in Norway, the world’s eighth-largest oil exporter and a star European economic performer. Investment in its oil sector is expected to jump in coming years thanks to new oil discoveries off the country’s long coastline.
Norway has no national debt, and its oil wealth allows it to run structural budget deficits and still use only a fraction of its oil revenue for budget purposes.
“Despite the challenging global economic environment, the Norwegian economy continues to perform well, and capacity utilization is now higher than foreseen at the presentation of the Revised National Budget last May,” said Finance Minister Sigbjoern Johnsen.
Some economists had expected the Labor-led government to announce even higher spending plans to sweeten up voters ahead of next year’s elections, with opinion polls pointing to a shift in power in favor of a right-wing government.
“If anything the budget is probably a bit tighter than most had expected, but probably not enough to have any impact on the market,” said Erik Bruce, chief analyst at Nordea.
The crown was largely stable against the euro at 7.40 crowns on Monday, as the budget was also seen to have no clear implications for the central bank.
“This will not affect Norges Bank’s rate path at all,” said Knut Anton Mork, chief analyst at Handelsbanken.
The central bank left interest rates on hold at 1.5 percent in August and signaled no change until late 2012 at the earliest.
Underlining its stellar economic performance, the government raised its forecast for 2012 mainland gross domestic product growth to 3.7 percent from its May forecast of 2.7 percent, and said it saw next year’s growth at 2.9 percent.
Its economy expanded an annualized 5 percent in the second quarter, the fastest growth in Europe.
The structural budget deficit - the shortfall before the country’s massive oil revenue is accounted for - is expected at 3.3 percent of the oil fund next year, or 125.3 billion Norwegian crowns ($22 billion), up from 116.2 billion crowns seen this year.
Still, in a normal year, up to 4 percent of the $660 billion oil fund can be used to plug the budget gap.
The structural deficit is seen at 5.3 percent of the mainland gross domestic product trend, making the budget slightly more expansive than the 5.2 percent seen for 2012.
“Measured by its overall impact on mainland GDP, the 2013 budget implies an approximately neutral fiscal stance,” the finance ministry said.
When the oil money is taken into consideration, the projection turns to a 380 billion crown surplus.
The draft budget showed that the carbon tax on the offshore petroleum industry will be raised by 200 Norwegian crowns ($35.3) per tonne next year.
“This corresponds to an emissions charge of roughly 410 crowns per tonne of carbon dioxide,” the government said.
The budget also proposes a 50 crowns per tonne tax on emissions from the fishing industry.
The government plans to create a fund of 10 billion crowns to promote cuts in greenhouse gases and renewable energy. Use of fossil fuels is the main source of greenhouse gases from human activity. Norway will also raise the amount of cash spent to help developing nations protect tropical forests that absorb carbon dioxide.
Norway has been the most generous developed nation in helping slow deforestation under a U.N. plan.
“The efforts in this area are yielding good results. Norway has helped achieve considerable reductions in emissions in Brazil and better forest management in Indonesia, Ethiopia, Guyana and Tanzania, among others,” the Environment Ministry said in a statement.
($1 = 5.6655 Norwegian crowns)
Reporting by Joachim Dagenborg and Terje Solsvik, writing by Victoria Klesty; Editing by Hugh Lawson