Ekonomické analýzy
Norway

Norway

Population 5.4 million
GDP 67,326 US$
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Synthesis

major macro economic indicators

  2019 2020 2021 (e) 2022 (f)
GDP growth (%) 0.9 -0.7 4.1 4.0
Inflation (yearly average, %) 2.2 1.3 3.5 4.1
Budget balance (% GDP)* 6.6 -1.1 -0.6 3.2
Current account balance (% GDP) 2.9 1.1 15.3 16.1
Public debt (% GDP) 40.3 43.0 38.0 33.0

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

STRENGTHS

  • Huge oil and natural gas deposits; the energy sector accounts for 17% of GDP, 19% of investments and 52% of exports
  • High standard of living
  • Broad political consensus
  • Well-capitalised banking system
  • Largest sovereign wealth fund in the world (around 300% of mainland GDP in 2020, the fund owns almost 1.5% of all shares in the world)
  • As a member of the European Economic Area, Norway has a preferential access to the EU market

WEAKNESSES

  • Structural budget deficit when excluding oil and gas revenues
  • High household debt (111% of nominal GDP in 2020)
  • Significant labour costs
  • Shortage of skilled workers

RISK ASSESSMENT

Norwegian economic outlook impacted via prices

The war in Ukraine and the European Union-related sanctions against Russia and Belarus, which have been incorporated into Norwegian law (Norway is not an EU member), have not substantially changed the outlook for the Norwegian economy in 2022. The direct effects of the sanctions will be limited because Russia accounts for less than 1% of Norway’s exports and less than 3% of its imports. At the same time, Belarus accounts for less than 1% of Norway’s exports and imports (2020). Nevertheless, there will be indirect effects via commodities. The surge in energy and other commodity prices will erode households’ purchasing power. Private consumption (45% of GDP) will be modest in 2022 because of inflation pressures and declining consumer expectations . However, it will still grow, as employment has increased further, and the number of fully unemployed people is now lower than before the pandemic, more than two years after the major lockdown on 12 March 12 2020. Recently, the rise in wages has still been accelerating, which might, in turn, drive inflation higher over the coming period, and lead the unions to look for compensation in this year’s pay settlement. Inflation in Norway remains above the central bank's target (2%), but it has not accelerated as sharply as in almost all other countries in the region. As expected, the Norges Bank again reacted to the inflation-induced pressure in March by rising its key interest rate from 0.5% to 0.75%. It will most likely be raised further in June. Still, the lacklustre private consumption will be balanced out by higher investments and exports. Norway’s oil and gas investment is expected to rise over 2022, driven by new project launches and new fields coming online. Investors’ interest in exploration will remain solid in 2022, and strong participation in the country’s Awards in Predefined Areas (APA) 2021 licencing round - over 53 new production licences were granted in January 2022 - from both international and domestic players will ensure an uptick in exploration activity over the coming quarters. Oil production is expected to rise, driven by the Johan Sverdrup Phase 2 initiative, oil companies’ new development plans, and delayed new fields, which are supposed to be ready for use. Moreover, Norway can boost its natural gas output in the coming months, keeping production higher than normal through the summer and delivering bigger volumes to Europe at a time of shortages and soaring prices. The country exports about 95% of its gas via an extensive subsea pipeline network linking it to terminals in Germany, Britain, France, and Belgium. A new pipe to Poland will be completed this year. Norway provides between 20% and 25% of Europe's gas supply. At the time of writing, Norway is delivering gas to Europe at maximum capacity, as gas prices in Europe surged in the previous year . The country will continue to benefit from high oil and gas prices, which together comprise about 42% of its goods exports (2020). Exports from the non-oil industry (such as fish, aluminium, machinery and equipment) will remain firm, and benefit from well-oriented  global demand and prices, as well. Meanwhile, overall government spending is expected to remain modest in 2022, with fiscal expansion limited to public works and infrastructure. Moreover, support for companies, additional aid to Ukraine (weapons and military equipment) and assistance for refugees should be implemented in the near future.

 

Public accounts turning positive again thanks to the sovereign wealth fund

Due to noticeably stronger tax revenues (corporate, and personal, with the planned expiry of the temporary tax relief) and reduced (Covid-related) expenditures, the government’s net lending (excluding oil and gas revenues and withdrawals from the pension fund) should shift from a deficit of -10% of GDP in 2021 to -6.4% in 2022. This will be compounded via direct transfers from the oil industry and withdrawals from the sovereign wealth fund (SWF) . In normal times, withdrawals are limited to 3% of the fund’s value, which corresponds to the expected annual return of the fund, expected to rise this year. Consequently, the burden of the public debt will continue to decline in 2022, especially with GDP growth remaining healthy. Higher oil & gas and manufactured exports, as well as strong investment revenues from abroad, will boost the current account surplus, which is set to reach its highest level since 2008.

 

The Social Democrats take the helm

The social-democratic Labour party won the general election in September 2021 with 26.3% of the votes (48 seats, -1 seat), while the formerly ruling Conservatives reached only 20.4% (36 seats, -9 seats). The agrarian Center party (13.5%, 28 seats, +9 seats) came in third, followed by the right-wing Progress party (11.6%, 21 seats, -6 seats), the Socialist Left (7.6%, 13 seats, +2 seats) and five smaller parties. Labour chairman Jonas Gahr Støre formed a minority government with the Centre party (together 76 out of 169 seats), after the Socialist Left declined to enter the coalition, because they see the Labour’s climate policy as not aggressive enough and disagree as well on the welfare policies. The main disagreement concerns the exploration of new oil resources: the Socialist Left wants to see this come to a halt, while the Labour and Centre parties have rejected this. Nevertheless, the Socialist Left announced they would support the policy of the government on common ground topics. Minority governments are common in Norway. Although the Centre party does not support Norway’s tight relationship with the EU, the new government won’t change the status quo, as it has a wide support in both the Labour party and the population. New Prime Minister Støre should stay in office until at least the next election in September 2025. In the context of the war in Ukraine, although Russia and Norway share a border, no conflict is expected as the latter is a NATO member.

 

Last updated: May 2022

Payment

Bank transfers are by far the most widely used means of payment. All leading Norwegian banks use the BIC/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, is widely used.

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 a competent court.

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 on the basis of the base rate determined by the Central Bank of Norway (Norges Bank) in effect as of either January 1 or July 1 of the relevant year, raised by eight 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 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 (tingrett). 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 court of first instance 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 they 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 assessed and a list of approved claims is established.

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 (tingrett). 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 court of first instance is competent to hear disposals of capital assets, estate successions, as well as insolvency proceedings.

Insolvency trend Norway
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