Government deficit persists

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.

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.