Norway govt says plans 2010 budget to secure jobs

OSLO, March 8 (Reuters) - The Norwegian government aims for a 2010 budget that secures jobs as its top priority and will funnel money into environmental protection, schools and roads to accomplish that, Prime Minister Jens Stoltenberg said on Sunday.

Norway’s $300 billion oil-exporting economy has fared better than many in the global turmoil, but activity is falling and unemployment is rising and the government has forecast the economy will slip into recession this year.

“The most important thing will be to secure jobs,” Stoltenberg said on Norwegian TV 2 news after his coalition government met to start talks on next year’s budget.

“That will be demanding,” the Labour prime minister said, but he added that Norway was prepared to spend more on securing employment than other countries in Europe.

“We see that unemployment is increasing and will increase (further) in 2009,” Stoltenberg said. “Nevertheless, Norway is among the countries in Europe with the lowest unemployment and strongest measures to secure jobs.”

He listed measures to combat climate change and protect the environment and to improve education and roads as areas where the government would spend and simultaneously secure jobs.

Though Norwegian unemployment remains low in international comparison, the government has forecast it will rise to an average of 3.5 percent in 2009 from 2.5 percent in 2008 and approach 4 percent towards year-end.

Stoltenberg said last week the government, which faces elections in September, may need to lift that forecast.

Statistics Norway’s forecast from last month is for unemployment to rise to 3.7 percent on average this year.

In the three months to the end of January, unemployment rose to 3.0 percent from 2.9 percent in the previous three-month period, according to Statistics Norway’s labour force survey. Oil and gas exporter Norway has hefty budget surpluses when petroleum money is included, but runs budget without oil cash.

In late January, when it presented a $2.9 billion economic stimulus package, the government projected a 2009 non-oil structural deficit -- reflecting the amount of oil money to be spent -- of 119 billion Norwegian crowns ($16.82 billion).

That means spending 5.2 percent of a sovereign wealth fund that saves oil money for future generations, exceeding the government’s 4 percent cap on spending of oil cash.

The government estimated in January that gross domestic product would contract by 0.5 percent this year after 2.0 percent growth last year.

The finance ministry has forecast zero mainland growth in 2009. The mainland economy excludes the big oil and gas sector and ocean-going shipping.

But the ministry’s forecasts from January may be out of date already. Statistics Norway forecast on Feb. 19 that both mainland GDP and overall GDP would shrink 1.7 percent this year.

The central bank, Norges Bank, has slashed rates by a total of 325 basis points to 2.5 percent since October to counteract the worst effects of the global crisis and said it sees rates bottoming out at around 2.0 percent later this year.

Economists widely expect at least another quarter point cut when the bank holds its next policy-setting meeting on March 25.

(Additional reporting by Camilla Knudsen; Editing by Bernard Orr)

Reporting by John Acher