Oil-rich Norway will withdraw a record $37 billion from wealth fund as COVID-19 batters economy

The withdrawal from the country's rainy-day fund is more than four times the size of its last record withdrawal

Oil-rich Norway will withdraw a record $37 billion from wealth fund as COVID-19 batters economy

Norway plans to draw a record 382 billion kroner ($37 billion) from its wealth fund, in a move that will force the world’s biggest sovereign investor to embark on an historic asset sale to generate cash.

The unprecedented withdrawal is more than four times Norway’s previous record, which was set in 2016. The development reveals the scale of the economic damage done by the twin crises of Covid-19 and a collapse in global oil markets, with western Europe’s biggest crude exporter now facing its worst economic slump since World War II.

For the first time, Norway’s government is set to withdraw considerably more than the $1 trillion fund generates in cash flow from dividends and interest payments. The fund hasn’t provided an estimate for its income this year, but has said it’s bound to be lower than previously expected, as companies slash shareholder payouts. The fund’s cash flow was 243 billion kroner last year.

With asset liquidation now an inevitability, the fund is likely to focus sales on its bond portfolio. That’s because it needs to increase its holding of stocks after the equity portfolio fell below a required 70% target of the total portfolio.

Norway’s government uses its oil wealth to plug budget deficits every year. Until 2016, the so-called structural oil-corrected deficit was covered by the state’s income from petroleum, namely taxes, stakes in offshore fields and dividends from Equinor ASA. As long as the government was generating a surplus, it could deposit money into the fund. In 2016 and 2017, deposits were replaced by withdrawals, as petroleum revenue dwindled due to a slump in prices. But the fund was still able to cover that easily with its cash flow.

In 2020, everything changed. The government now expects to spend a record 420 billion kroner of oil money on crisis packages to prop up its economy, with the collapse in petroleum revenue adding to the shock. The government predicts its net cash flow from petroleum activities will drop by 62% to 98 billion kroner, the lowest since 1999.

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The coronavirus downturn threatens to leave older women behind

Older women have a higher unemployment rate than men in their age bracket—and face challenges finding new jobs.

The coronavirus downturn threatens to leave older women behind

Good morning, Broadsheet readers! Coronavirus testing confusion sounds familiar to the Theranos whistleblower, face masks are mandated in France but burqas are still banned, and the economic downturn threatens to leave older women behind. Have a great Tuesday. 

– No woman left behindThe April jobs report, with its confirmation of the gender gap in rising unemployment—women’s unemployment is at 16.2% to men’s 13.5%—included a remarkable statistic. Young women ages 20 to 24 face one of the highest unemployment rates of any demographic slice: 28% compared to 24% for men in the same age group, according to the National Women’s Law Center. 

But another unemployment data point, though not as likely to grab headlines, is deserving of attention: the jobs crisis facing older women. According to the AARP, women over the age of 50 now face an unemployment rate of 15.5% compared to 12.1% for men in the same demographic. 

AARP CEO Jo Ann Jenkins is working to make sure older women aren’t forgotten during this economic downturn. “Older women are likely to earn less than men, to have saved less, and to have longer life expectancies, with the health care costs that go with it,” Jenkins told me via email. “When and if she finds a new position, there’s also a likelihood the new job isn’t as good as her former one—a condition of underemployment, often related to age and gender discrimination, that worsens her long-term financial outlook.” 

Many women who fall into this demographic took breaks from the workforce earlier in their careers because of caregiving responsibilities—a contributor to the pay gap that costs women as much as $1 million in lifetime earnings. That reality compounds the financial impact of job loss during a downturn. “For a woman to lose her job later in her career is a serious setback,” Jenkins says. 

When older workers, including women, are unemployed during a downturn, they are likely to stay unemployed for longer; a woman is 18% less likely to find a new job when she’s between the ages of 50 and 61 than when she is between 25 and 34, according to a study by the Urban Institute. That challenge is especially concerning during an economic crisis in which recovery depends on public health. 

This demographic analysis is one of many to parse from the BLS report; there is also, of course, the crisis facing women of color of all ages. Black women’s unemployment reached 16.4% and Latina unemployment hit 20.2% in April. In total, the economic crisis has wiped out the entirety of the 11.1 million jobs women gained in the last decade; men lost 85% of their jobs gained in the same period. 

As lawmakers try to ignite an economic recovery and companies slowly begin hiring again, Jenkins has a plea: don’t leave older women behind. 

Emma Hinchliffe
emma.hinchliffe@fortune.com
@_emmahinchliffe

Source : Fortune More   

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