Gazdasági elemzések
Norway

Norway

Population 5.4 million
GDP 75,294 US$
A2
Country risk assessment
A1
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Synthesis

major macro economic indicators

  2018 2019 2020 (e) 2021 (f)
GDP growth (%) 1.1 0.9 -1.6 3.7
Inflation (yearly average, %) 2.8 2.2 1.3 1.8
Budget balance (% GDP)* 7.8 6.2 2.0 4.2
Current account balance (% GDP) 8.0 2.5 2.1 2.9
Public debt (% GDP) 39.1 40.2 43.9 41.0

(e): Estimate (f): Forecast *The public budget includes withdrawals from the Sovereign Wealth Fund

STRENGTHS

  • Huge oil and natural gas deposits
  • High standard of living
  • Broad political consensus
  • Well-capitalised banking system
  • Large sovereign wealth fund (around 300% of mainland GDP)

WEAKNESSES

  • Budget deficit when excluding oil and gas revenues
  • High household debt
  • Significant labour costs
  • Shortage of skilled workers

RISK ASSESSMENT

Relatively fast recovery after a punctual recession

The COVID-19 pandemic hit the Norwegian economy in the spring of 2020 in swift and punctuated manner, not only because the government had to introduce a lockdown of several weeks (all public social activity was shut down, although shops remained open), but also because of the collapse of the oil price due to the absence of energy demand from abroad. The Norwegian energy sector accounts for 17% of GDP, 19% of investments and 52% of exports. After the lockdowns in Europe were lifted in spring and the demand for Norwegian oil and gas increased with it, the economy recovered very dynamically because, among other things, the COVID-19 outbreak in Norway had remained relatively limited. Private consumption picked up over the summer for goods, but also services, as most Norwegians spent their holidays at home due to closed borders (Norway has a negative tourism-service balance). Furthermore, oil investments recovered quickly thanks to the partial rebound of the oil price and the government’s tax relief package for the oil industry, which will apply to all new development projects started by the end of 2022. Towards the end of 2020, a second wave of the COVID-19 pandemic hit Norway, which led to a renewal of restriction measures (shops remained open). The growth dynamic in the winter half-year 2020/21 is therefore expected to be muted. In spring, consumption should again show a recovery, as the unemployment rate should slowly return to more sustainable levels. The unemployment rate of the Labour and Welfare Administration (NAV) reached an all-time high of 10.6% in March 2020. It should revert to a more sustainable level, but not to the pre-COVID-19 level of 2.1%. Moreover, the majority of Norwegians will again stay at home for the 2021 summer holidays, which will therefore further increase private consumption. The economy will probably be supported by the oil industry, as the Brent-oil price is likely to reach a level of USD 50 per barrel in 2021, from an average of around USD 42 per Barrel in 2020, due to higher demand and still active production cuts of the OPEC. While the government cushioned the recession in 2020 via support measures worth NOK 166 billion (4.5% of total 2019 GDP), most of them will have faded out by the end of the year. The new budget for 2021 includes a new impulse of NOK 128.5 billion (3.6% of GDP), which is mostly concentrated in infrastructure projects, green energy development and defence expenditures. Some of this will be financed via the increase of the CO2 tax by 5%. On the other hand, the Norges Bank cut its key interest rate from 1.50% to 0% in 2020. Moreover, it provided additional liquidity to banks in the form of loans of diverse maturities. For 2021, the Bank should hold its key interest rate at 0%. However, due to the robust economic development, we cannot rule out a first rate hike of 25 basis points at the end of 2021.

 

Financial situation remains balanced thanks to the sovereign wealth fund

With still high expenditures on exceptional support measures and slowly increasing oil and gas revenues, the government’s net lending should be still very negative in 2021, albeit to a lesser extent (-6.9% of GDP after -9.5% in 2020). However, this will be more than balanced out via withdrawals from the sovereign wealth fund (SWF). In normal times, these are limited to 3% of the fund’s return. In 2020, they reached 3.9%, but should return to 3% in 2021. The burden of the public debt will therefore remain moderate. The decreasing goods trade balance was the only brake pad of the current account, while the services balance went positive and the primary balance remained solid in 2020. For 2021, we expect a stronger demand from Norway’s main export destinations, which will help to increase the current account surplus again.

 

Government on a rocky road until the next election in September 2021

Prime Minister Erna Solberg of the Conservative Party (45 out of 169 seats in the parliament) is leading a minority government coalition with the Liberal Party (8 seats) and the Christian Democratic Party (8 seats). The former coalition partner, the Progress Party (FrP, 26 seats) left the coalition in January 2020. The government coalition still needs its support, which is increasingly harder to gain. Solberg’s Conservative Party gained support with its successful handling of the COVID-19 outbreak, bringing back its poll result from 18% in February to 24% in early 2021 (the support level enjoyed in the last election in September 2017). The longer the pandemic lasts, the more willingness to work together decreases in the parliamentary system. However, the coalition is expected to hold until the next election on 13 September 2021.

 

Last updated: March 2021

Payment

Bank transfers are by far the most widely used means of payment. All leading Norwegian banks use the SWIFT electronic network, which offers a cheap, flexible and quick international funds transfer service.

Centralising accounts, based on a centralised local cashing system and simplified management of fund transfers, also constitute a relatively common practice.

Electronic payments, involving the execution of payment orders via the website of the client’s bank, are rapidly gaining popularity.

Bills of exchange and cheques are neither widely used nor recommended, as they must meet a number of formal requirements in order to be valid. In addition, creditors frequently refuse to accept cheques as a means of payment. As a rule, both instruments serve mainly to substantiate the existence of a debt.

Conversely, promissory notes (gjeldsbrev) are much more common in commercial transactions, and offer superior guarantees when associated with an unequivocal acknowledgement of the sum due that will, in case of subsequent default, allow the beneficiary to obtain a writ of execution from the competent court (Namrett).

Debt collection

Amicable phase

The collection process commences with the debtor being sent a demand for the payment of the principal amount, plus any contractually agreed interest penalties, within 14 days.

Where an agreement contains no specific penalty clause, interest starts to accrue 30 days after the creditor serves a demand for payment and, since 2004, is calculated at the Central Bank of Norway’s base rate (Norges Bank) in effect as of either January 1 or July 1 of the relevant year, raised by seven percentage points.

In the absence of payment or an agreement, creditors may go before the Conciliation Board (Forliksrådet), a quasi-administrative body. To benefit from this procedure, creditors must submit documents authenticating their claim, which should be denominated in Norwegian kroner.

The Conciliation Board then allows the debtor a short period to respond to the claim lodged before hearing the parties, either in person or through their official representatives (stevnevitne). At this stage of proceedings, lawyers are not systematically required. The agreement therefore reached will be enforceable in the same manner as a judgement.

 

Legal proceedings 

If a settlement is not forthcoming, the case is referred to the court of first instance for examination. However, for claims found to be valid, the Conciliation Board has the power to hand down a decision, which has the force of a court judgement.

A case which is referred to the higher court will commence with a summons to appear before the municipal or District Court. The summons will be served on the debtor with an order to give the court notice of intention to defend if he so wishes.

Where a defendant fails to respond to the summons in the prescribed time (about three weeks) or fails to appear at the hearing, the Board passes a ruling in default, which also has the force of a court judgement. The length of proceedings varies from one court to another.

More complex or disputed claims are heard by the court of first instance (Byret). The plenary proceedings of this court are based on oral evidence and written submissions. The court examines the arguments and hears the parties’ witnesses before delivering a judgment.

Norway does not have a system of commercial courts, but the Probate Court (Skifteret) is competent to hear disposals of capital assets, estate successions, as well as insolvency proceedings. 

Enforcement of a court decision

 

A domestic judgment is enforceable for ten years if it has become final. If the debtor does not comply with the judgment, the creditor can request compulsory enforcement of the judgment from the enforcement authorities, which will then seize the debtor’s assets and funds.

Even though Norway is not part of the EU, particular and advantageous enforcement mechanisms will be applied for awards issued by EU countries, such as EU payment orders or the European Enforcement Order, under the “Brussels Regime”. For decisions rendered by non-EU members, they will be enforced on a reciprocity basis, provided that the issuing country is party to a bilateral or multilateral agreement with Norway.

Insolvency proceedings

Out-of court proceedings

Private non-judicially administered reorganizations are common in Norway; even though there are not regulated by law. Debtors and creditors are free to make any kind of arrangements, but in practice the Debt Reorganization and Bankruptcy Act is often applied. A third party (a lawyer or an accountant) can handle the process if the parties wish it so.

 

Restructuring the debt

This procedure can only be initiated by a wiling debtor. His financial situation is assessed with a court-appointed supervisory committee and a composition proposal is prepared. If the court agrees, a composition committee as well as a court appointed trustee will manage the debtors’ operations and formulate a composition agreement. A debt settlement proceeding may result in a completed debt settlement, composition or the commencement of a bankruptcy proceedings.

 

Bankruptcy proceedings

Proceedings can be opened by court decision either from the debtor or creditor. The latter must guarantee for expenses related to the proceedings. The court will appoint a trustee and assess the need for a creditor committee prior to issuing a bankruptcy order and given the creditors time to file their claim (three to six weeks). All of the debtor’s assets are confiscated, the debt is evaluated and a list of claims is established.

Insolvency trend Norway
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