Government deficit persists


The general government accounts recorded a deficit for the second consecutive quarter in 2020Q3. The accumulated deficit in 2020 so far amounts to NOK 75 billion.

Updated figures from General government revenue and expenditure show a 10 per cent decrease in accumulated revenue and an equal percentage increase in accumulated expenditure respective to the corresponding period in 2019. The net effect of changes in revenue and expenditure is expressed as net lending/borrowing, or simply the deficit, in the government accounts.

Figur 1

Figure 1. Revenue, expenditure and net lending/borrowing (1 year moving average)

Significant revenue reduction

The reduction in total revenue can largely be ascribed to diminished tax receipts from the petroleum sector. Tax revenue from the petroleum sector has been doubly affected in 2020 by lower oil prices and provisional amendments made to taxation of oil and gas (see box below). The tax relief program reduces petroleum taxes on the revenue account and furthermore increases capital transfers on the expenditure account, thereby reinforcing the net effect on the government books, all else equal.

Dividends from the State’s Direct Financial Interest and the Government Pension Fund Global are diminished. Additionally, reduced receipts from fees and excises, and slowed economic activity overall have contributed to reduced government revenue collected from mainland Norway.

Support for households and businesses

The government has implemented an array of measures to counter the effects of the economic shutdown on households and businesses in the wake of the COVID-19 outbreak. Social benefits payments have risen sharply, primarily as a result of increased unemployment benefits. After spiking in 2020Q2, unemployment benefits have come down slightly in the third quarter, although they still remaining high.

Guarantee schemes have been introduced to airlines and small and medium-sized enterprises to ease access to liquidity. The projected losses from these schemes are recorded as capital transfers to business.

As a result of compensation payments from the central government to enterprises affected by slower turnover in the wake of the COVID-19 outbreak, current transfers have increased in the government accounts. The first compensation payments following the initial shutdown in the spring of 2020 was recorded in the Q2 and Q3 accounts. The ongoing COVID-19 situation has prompted another government relief package, which will be disbursed as of 2021.

The oil and gas stimulus package

The parliament has made temporary amendments to petroleum taxation. The modifications allow the companies to deduct investments from the special tax base, effective immediately. Eligible companies can apply for a refund of their tax-assessed deficits in fiscal years 2020 and 2021. As a result, the revised national budget estimates negative accrued taxes for the fiscal year 2020. These transactions are not recorded as negative taxes, but rather as capital transfers to business. Due to the uncertainty of the final 2020 amount, quarterly figures are preliminary estimates.