Estudos Económicos
Norway

Norway

Population 5.4 million
GDP 89,042 US$
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Synthesis

major macro economic indicators

  2020 2021 2022 (e) 2023 (p)
GDP growth (%) -1.9 4.0 3.4 2.4
Inflation (yearly average, %) 1.3 3.5 5.8 5.3
Budget balance (% GDP)* -2.6 9.7 16.0 16.0
Current account balance (% GDP) 1.1 15.0 30.0 30.0
Public debt (% GDP) 45.9 43.2 36.0 32.0

(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 365% of mainland GDP in 2021, 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
  • NATO-member state

WEAKNESSES

  • Structural budget deficit when excluding oil and gas revenues
  • High private household debt (108% of nominal GDP in 2021)
  • Significant labour costs and shortage of skilled workers
  • Exposure to climate risk (such as significant drought in 2022, which put at risk operations at the hydroelectric power stations, particularly in the south)

RISK ASSESSMENT

A big winner of the Russia-Ukraine war, but external shocks will weigh on growth

Since the start of the war in Ukraine, and even more since the cut-off of natural gas supply from Russia to Germany (Sept. 2022), Norwegian gas and oil exports (60% of all goods’ exports in 2021) have been critical to European energy security. This situation will continue in 2023. Although the European consumer countries are looking for alternatives, e.g. with the construction of LNG terminals, these projects still need a few quarters until the European energy market adapts to the new situation. At the time of writing, in early 2023, Norway was already delivering gas to Europe at maximum capacity. Nevertheless, new gas projects are in the pipeline, some came online in late 2022 and others will be developed over the year 2023. Already at the start of 2022, over 53 new production licences were granted covering the North Sea, the Norwegian Sea and the Barents Sea. Additional licences in the Barents Sea are to be awarded in January 2023. Furthermore, oil production should rise due to the full implementation of a fifth oil mining platform at the Johan Sverdrup oil field. Norway exports about 95% of its gas via an extensive subsea pipeline network linking it to terminals in Germany, Britain, France and Belgium, among others. The new Baltic Pipe project, a gas pipeline for Norwegian gas from Denmark to Poland, came online in October 2022 (operating at full capacity from the end of Nov. 2022) and will cover roughly 60% of Poland's previous gas imports from Russia. In this context, despite a slowdown of global economic activity over the 2022-2023 winter, the demand for Norwegian energy should remain strong and even increase in spring when the natural gas storages are likely to be depleted. This should support total Norwegian exports of goods (around 33% of GDP in 2021) as exports from the non-oil industry (such as fish, aluminium, machinery and equipment) could falter due to the slowdown/recession Western Europe. Although Norway has a high-energy reservoir (oil and gas represent around 27.5% in the energy mix in 2020 as hydropower is the mainstay of the Norwegian electricity system), even for Norwegian consumers and corporations, fuel and food prices have strongly increased, especially electricity prices due to low rainfall. This is eroding purchasing power and is limiting private consumption (45% of GDP) as well as investments in the non-oil sector. On that score, together with the healthy position of the labour market, which fully recovered from the pandemic, wages are noticeably increasing, thereby putting even more pressure on inflation. While an average inflation rate of just under 6% is relatively low, compared to Scandinavian and Western European neighbours, it is still noticeably above the central bank's target of 2%. Already in 2022, Norges Bank lifted the key interest rate five times from 0.5% to 2.75%. According to central bank projections, further rises up to 3% are likely over the year 2023, albeit with more gradual frequency. Government spending is expected to remain modest, with fiscal expansion limited to support households and companies to deal with higher energy bills (the initial programme was due to end in late 2022, but the government is expected to extend it in 2023).

 

Current account surplus reached record high

The combination of strong demand for energy products and soaring energy prices has skyrocketed Norwegian goods exports. Even despite higher imports, a decrease of the services trade deficit balance (due to the expectation of fewer foreign tourists) and a decrease in overseas investment revenues, this is more than enough to bring the current account balance far above the highest level ever seen in the period that started in 1981. From the fiscal side, expenditures will remain roughly unchanged, with state support to cope with high energy prices as well as support for refugees from Ukraine. However, it is expected that tax revenues will increase so that the structural government non-oil deficit will decrease from 6.5% of GDP in 2022 to 5% in 2023. However, this will more than balance out via withdrawals from the sovereign wealth fund (SWF). Although the share of withdrawals in 2023 will be lower with 2.5% of the profits, these were so strong that the total budget surplus will remain the highest in decades. The public debt burden will therefore continue to decline sharply in 2023 and remain moderate.

 

Conservatives more popular than the governing Labour Party – Energy infrastructure in the lime light

Since September 2021, Prime Minister Jonas Gahr Støre of the social-democratic Labour party (48 out of 169 seats in the parliament) has led a minority government with the populist-agrarian Center Party (28 seats). The coalition is supported by the Socialist Left (13 seats) in Parliament, which declined to enter the coalition in 2021 after disagreements over welfare policies. Minority governments are common in Norway. Since the election, the Labour Party has lost some of its popularity and was already overtaken by the Conservative Party, the biggest opposition party, in December 2021, because of the harsh pandemic measures that were implemented by the government. Since then, the gap between the Conservative and the Labour Parties has widened, and reached 8 percentage points by late 2022. One reason for this further loss of popularity is the increasing electricity prices for Norwegians. Nevertheless, Prime Minister Støre should stay in office until the next election in September 2025 due to a huge consensus in the political system and because of the geopolitical threat from Russia (Russia and Norway share a small border).
While military conflict is very unlikely, Norwegian authorities will tighten its energy infrastructure security after the explosions at the Nord Stream gas pipelines in the Baltic Sea in late September 2022 (the investigation is still ongoing). Additionally, suspicious drones were seen near Norwegian offshore oil platforms in autumn 2022, which forced the country to deploy military action to protect its oil and gas installations.

 

Last updated: February 2023

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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