Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website. 

Scope completed the monitoring review for the Kingdom of Norway (AAA/Stable; S-1+/Stable) on 2 May 2022.

This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Key rating factors

The Kingdom of Norway’s long-term AAA/Stable ratings are underpinned by the following credit strengths: i) the country’s wealthy and resilient economy, as demonstrated during the Covid-19 crisis; ii) a significant net public asset position, driven by savings accumulated through its sovereign wealth fund, the Government Pension Fund Global (GPFG); and iii) strong fiscal, monetary and financial governance institutions. Norway also benefits from low central government debt, issued solely to finance capital expenditure, and institutional strengths as a mature economy with one of the world’s highest per capita income levels. These factors increase the country’s resilience to economic shocks, including from the Covid-19 pandemic and growing inflationary pressure, and provide the government with fiscal space to support the economy with countercyclical fiscal measures. Direct economic adverse impacts from the Russia-Ukraine war appear to be small, given Norway’s energy independence and low trade exposure to the two countries.

Challenges relate to: i) vulnerabilities in the Norwegian financial system, including from high levels of household debt and imbalances in the real estate sector due to high house prices; and ii) the long-term transition to a non-commodity-dependent economy.

The Stable Outlook reflects Scope’s view that risks to the ratings are balanced over the next 12 to 18 months.

The rating/Outlook could be downgraded if, individually or collectively: i) a significant weakening in macroeconomic policy threatened Norway’s long-term net public and external asset positions; ii) a financial crisis, potentially exacerbated by domestic imbalances, materially damaged Norway’s public sector and financial system balance sheets; and/or iii) significant shortcomings in addressing climate transition risks arose, resulting in a rapid increase in stranded asset risks.

For the updated report accompanying this review, click here.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Ratings Methodology, 8 October 2021) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Eiko Sievert, Director

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