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BUDGET

EXPLAINED: What Norway’s revised budget means for you

Norway has presented its revised budget for 2021, designed at helping the country recover from the coronavirus pandemic. Here's The Local's round-up of some of the key proposals and how they may affect you.

Published: 11 May 2021 18:06 CEST
EXPLAINED: What Norway's revised budget means for you
Norway's revised budget has been proposed with the aim of helping the country recover from the pandemic. Photo by Pixaby, Pexels.

What is the revised budget?

The original provisional budget for 2021 was presented in October 2020, but the government has reviewed and revised the original budget with the aim of reducing the long-term effects of the coronavirus pandemic, and strengthening the country’s efforts to reopen society.

“The reopening of society has started. Vaccination is well underway, and within months, most of the adult population will be offered vaccines. We have been in this crisis together, and together we shall leave it behind. With the revised budget, we strengthen the effort to create more jobs and include more people in the job market,” PM Erna Solberg said at the budget’s unveiling.

The budget was presented by Norway’s Finance Minister Jan Tore Sanner, and the country will be leaning heavily on its oil fund to finance its recovery from the coronavirus pandemic.

“It has been necessary to face the crisis with strong measures, and it is in line with the rule of action to increase the use of oil money in times of crisis like this,” the finance minister said.

The government is proposing extending financial support for businesses and employees, extra funding for hospitals, and airports. In addition to this the government wants to extend the cut in VAT until the end of summer, set up a new tax scheme for startups and tax wind farms.

Here’s how some of the proposals may affect you.

Funding for quarantine hotels until November

The Directorate of Security and Emergency Preparedness will receive more than 1.1 billion kroner in extra funding so that the quarantine hotel scheme can run until November 10th.

“The quarantine hotel scheme has proved to be an essential tool for limiting import infection as much as possible. Our proposal means we have the necessary budget to continue the scheme,” Justice Secretary Monica Mæland, said in a statement.

A further 29.1 million kroner of funding has also been set aside for the country’s entry registration system.

Everyone entering Norway from so-called “red” countries – those with high infection rates –  is required to fill out a registration form prior to their arrival. Part of the funding will go to call centres that deal with travellers queries, where demand has been much higher than expected. 

Extension of support schemes

The government’s various Covid-19 support schemes will be extended, with some being reduced.

Support for workers made redundant due to the coronavirus, called permittering, will now only be able to benefit for a maximum of 26 weeks, beginning in July. 

Workers on permiterring are laid off either fully or partially. Workers laid off at least 40 percent of regular hours can access financial support from NAV. Workers will receive either 80 or 60 percent of their wages from NAV, depending on how much they earn.

Workers on hourly contracts are paid an average based on their earnings. 

The government has pledged to extend the compensation scheme for businesses, wage support scheme and loan guarantee scheme for companies until October 2021, but they may be phased out from September if there is little demand.

“We emphasise that temporary crisis measures should be temporary. When Covid-19 measures are gradually lifted, the compensation schemes must also be scaled down,” finance minister Sanner said.

VAT reduction extended to the end of summer

Last year the government cut VAT for certain industries and businesses to 6 percent. This cut will stay in place until the end of the summer. 

The lower VAT rate will be in place until September 30th 2021, after that it will return to 12 percent.

The lower rate applies to passenger transport, hotels and accommodation, public broadcasting, cinemas, museums, amusement parks and sporting events.

This means anyone planning activities or a staycation in Norway this summer as society reopens could save a pretty penny thanks to the reduced VAT rate being extended.

More money for healthcare

Hospital budgets will be boosted to the tune of 7.3 billion kroner this year.

Around 800 million kroner is already earmarked to cover the costs of laboratories’ analysis of the Covid-19 virus. A further 1.5 billion kroner will be used to compensate hospitals for revenue lost to the Covid-19 pandemic.

There will also be increased funding for IVF treatment.

Estimated growth of 3.7 percent

The government forecasts economic growth based on GDP of 3.7 percent in 2021. This is down compared to the 4.4 percent the government predicted in its original budget last fall.

READ MORE: Rising house prices: What’s next for the Norwegian economy? 

However, this isn’t cause for concern as 3.7 percent is only 0.2 percent higher than what is considered the ideal growth rate of 3.5 percent. This is regarded as the sustainable rate an economy can grow without facing any adverse side effects.

Tax on wind farms 

Government is introducing a tax on the production of wind turbines from 2022. 

The tax has been described as “moderate” by government.The money raised by the tax will go to municipalities that host wind turbines, 

READ MORE: Why Norwegian fisherman are against more offshore wind farms 

More money for airports 

Avinor, which operates Norway’s airports will receive an additional one billion kroner in funder, taking total funding for 2021 to 3.8 billion kroner. 

Government will also pay out 212 million kroner in lost revenue to Top Sandefjord and Haugesund airports. 

Start Ups 

Government is proposing a new tax option scheme for companies in the start-up and growth phase. The scheme will make taxes simpler for companies and employees and will provide a more favourable tax treatment to encourage growth in the start up sector. 

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MONEY

How to protect your Norwegian savings when the stock market jitters

Despite a rebound on the Tokyo Stock Exchange on Tuesday, Monday's stock market fluctuations have left Norwegian consumers worried about their savings invested in the market.

Published: 6 August 2024 10:01 CEST
How to protect your Norwegian savings when the stock market jitters

On Monday, concerns about a potential recession in the US influenced financial markets across Asia and Europe.

The Oslo Stock Exchange (Oslo Børs) opened with a sharp fall on Monday morning. This downturn followed a stock market crash on the Tokyo Stock Exchange.

READ MORE: What the Norwegian krone’s fresh slump means for your finances

Similar declines were seen in other Scandinavian capitals, such as Copenhagen and Stockholm.

Wall Street mirrored this negative trend, with the Nasdaq technology index plunging over 6 percent at the opening.

By the end of the trading day, Nasdaq closed down 3.43 percent, the S&P 500 fell around 3 percent, and the Dow Jones ended down 2.6 percent.

Despite a notable rebound on the Tokyo Stock Exchange on Tuesday, with the Nikkei index rising more than 10 percent, the dramatic stock market fluctuations have left Norwegian consumers worried about their savings invested in the market.

Many were left wondering whether the developments called for action.

Important not to make rash decisions, expert says

Generally speaking, when you see alarming headlines about the stock market, most people shouldn’t do anything – they should sit down and calmly ride the wave out, Américo Fernández, a household economist at the Swedish SEB bank, told The Local on Monday.

“Of course, it’s always dramatic when we have such developments in the stock market in just one or two days,” he said, adding that people with savings in the stock market shouldn’t be that worried.

“I would say that this is how the stock market works: there’s a lot of uncertainty and risk connected.

“When you have savings on the global stock exchanges, this will happen, especially when we’ve had at least six months of really, really good returns – maybe even too good. Then, this is a little bit expected,” he said.

Advice for savers across Scandinavia

Fernández shared his advice for worried savers across the Scandinavian countries, noting that it’s understandable that stock market volatility can raise concerns about the safety of people’s savings.

For those wondering how to protect themselves against such crashes, he emphasised the best strategy is to take a consistent and steady approach to investing.

“The most common thing, the best strategy for the broad masses, is to save every month,” he said, adding that investing in a mutual fund is a great way to go about this.

“In circumstances such as these (note: when there’s a crash), you buy more at a lower price. So, instead of timing the stock market, which is almost impossible, continue your monthly investments through mutual funds. That’s a good way of diversifying your portfolio,” he said.

READ MORE: How much money do you need to live on a single income in Norway?

The SEB household economist also advised against reacting hastily to alarming headlines.

“It’s understandable that a lot of people are affected by herd mentality when we have these negative headlines. Everyone, but especially households with tiny savings, acts and sells, and then they buy again when the headlines are positive, when the stock exchange is at high levels…

“That is the opposite of what you should do. Try to neglect these things and be cool in these circumstances, even though it seems bad and hurts your wallet,” he noted.

This advice is relevant across Scandinavia, according to Fernández.

“I think it’s applicable across Scandinavia. All Nordic countries save a lot of money on the stock exchange, partially because the pension system isn’t fully funded by the government,” he said.

US financial developments and new stock market tumbles

Is this stock market fluctuation a rare event, or is there more volatility on the horizon?

In recent years, the US stock market had surged on the wings of strong technology optimism, chief economist Elisabeth Holvik at SpareBank 1 told the Norwegian Broadcasting Corporation (NRK) on Monday.

However, recent declines saw technology giants like Nvidia, Apple, and Tesla falling between 4 and 7 percent.

“Now, we see that the economy is slowing down. Industry is slowing down, and consumption is slowing down. One is afraid that the whole economy will slow down too quickly and that the central bank has fallen far behind when it comes to cutting interest rates.

“So, until you get the first interest rate cut, I think there will be great uncertainty and the risk of a further fall in the stock market,” Holvik said.

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