The world's largest sovereign wealth fund has reached its peak amid a collapse in oil prices, according to the governor of Norway's central bank.
The development means Western Europe's biggest crude producer needs to get used to lower revenue from its petroleum industry, Gov. Oeystein Olsen said in the text of a speech delivered in Oslo on Thursday.
“At an oil price of around $60 per barrel, transfers to (the wealth fund) may come to a halt,” Mr. Olsen said. As head of the central bank, Mr. Olsen oversees Norway's $860 billion Government Pension Fund Global.
Norwegian governments are allowed to use as much as 4% of the fund to plug budget deficits. As recently as October, Norway estimated the fund would reach 7.28 trillion kroner ($945 billion) by 2020. But a 50% plunge in the price of Brent crude since a June peak has undermined those growth assumptions as the country's main source of income gets pummeled by a supply glut.
The fund, into which Norway channels most of its oil wealth to avoid overheating the economy, has had an average real return of 3.8%, according to the central bank. The government should now be “prepared for the possibility that it will be lower, perhaps below 3%,” Mr. Olsen said.
The ruling coalition is planning to spend a record 164 billion kroner of its oil revenue this year and has promised more stimulus should the economy need it.