major macro economic indicators
|2017||2018||2019 (e)||2020 (f)|
|GDP growth (%)||2.3||1.3||1.4||2.6|
|Inflation (yearly average, %)||1.9||2.8||2.2||2.0|
|Budget balance (% GDP)||5.0||7.2||7.4||7.3|
|Current account balance (% GDP)||5.7||7.2||4.3||5.0|
|Public debt (% GDP)||36.1||39.4||36.2||33.1|
(e): Estimate. (f): Forecast.
- Oil and natural gas deposits
- High standard-of-living
- Broad political consensus
- Well-capitalized banking system
- Large sovereign wealth fund (around 300% of mainland GDP)
- Budget deficit excluding oil and gas revenues
- High household debt
- Significant labour costs
- Shortage of skilled workers
Domestic demand remains the main source of growth
The Norwegian economy should show a strong growth in 2020. This is less due to a kick-start at the beginning of 2020 than to an already stronger growth dynamic in the end of 2019. The main factor here are the higher investments into the offshore oil and gas exploitation. They increased as most development projects are planned to remain profitable even with oil prices falling below 60 USD/bbl, due to cost reductions and efficiency improvements. The energy sector represents 17% of GDP, 19% of investments, and 43% of exports. Business investments on the mainland however, will remain moderate, as sentiment indicators decreased through 2019, while housing investments should pick up further in 2020, due to slowly increasing housing prices and a pickup in construction activity since 2019. Private consumption should foster a stronger growth dynamic. However, several factors are affecting private households in different directions. The tight labour market with a low unemployment rate (3.9% in September 2019) and moderate wage, as well as the decreasing inflation rate are increasing the purchasing power of the Norwegian customers. However, household debt is at a high level (100.2% of GDP in Q2 2019) and continues to rise faster than income. Additionally, the Norges Bank kept on with its exit out of the ultra-expansionary monetary policy in 2019 with three rate hikes until November 2019. The key interest rate reached a level of 1.5%. Another rate hike is expected in March 2020, which will further increase the interest-rate environment for Norwegian households. For the rest of the year, the interest rate will probably be unchanged. Even with this stark discrepancy between the Norwegian monetary policy and the one of the Eurozone and other developed countries, the Norwegian krone depreciated by 6% year-over-year in October 2019. This will foster exports via a better price-competitiveness. The still mute economic growth in Europe, however, particularly in the United Kingdom, could affect Norwegian exports, since a significant part of them go to the UK (especially hydrocarbons, fish, aluminium, mechanical and electrical equipment and ships).
A solid financial situation that owes much to oil and gas
Fiscal policy is orientated on diversifying the economy to reduce the country's dependence on the energy sector, but also supporting low-income families and an increase in the defence budget in 2020. A special focus lays on environmental measures, with an expansion of the public transportation system and an increase of the CO2 tax on mineral products by 5% on top of the inflation adjustment. Even with these planned expenditures, the budgetary rule limiting withdrawals from the sovereign wealth fund (SWF) to 3% of the fund’s return will be respected, with planned spending of 2.6% of the SWF’s capital in 2020. However, the non-oil deficit will amount to over 7% of GDP, illustrating the dependence of public finances on oil revenues and SWF dividends. The burden of public debt will remain moderate, in the country with the world’s largest SWF.
The current account surplus is expected to shrink, mainly due to the goods balance, which stood at 7.0% of GDP in 2018. Since then, imports increased noticeably, reflecting vigorous domestic demand, while exports – concentrated around oil, natural gas and salmon – have suffered in part by the decrease of global demand and by the drop in energy prices. This development should stabilize in 2020. The current account surplus however will be supported by the income surplus linked to the wealth fund's foreign investments.
A stable government
Following the parliamentary elections held in September 2017, Prime Minister Erna Solberg of the Conservative Party leads a minority governing coalition with the Progress Party (FrP), and since January 2018, the Liberal Party. However, the government was still dependent on the support of the Christian Democrats. They finally joined the coalition in January 2019, which brought the government more stability. However, since 2017, the opinion polls for the right-wing libertarian FrP, which isinter aliafocused on restricting immigration, are falling, because immigration decreased and the main reason to vote for the FrP vanished. To find new topics, the FrP could shift more rightwards, which could jeopardize the cooperation with the Liberals and the Christian Democrats. We assume that the coalition will hold until the next election in September 2021. If that is not the case, then a snap election will not be possible under Norwegian law, and instead the remaining parties could form a minority coalition, or the Liberals and Christian Democrats could form a new coalition under the lead of the labour party.
Last update : February 2020
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).
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.
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.
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.
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.