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 (long-term local and foreign-currency issuer and senior unsecured debt ratings: AAA/Stable; short-term local- and foreign-currency issuer ratings: S-1+/Stable) on 11 April 2023.

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 and the energy crisis following the escalation of the Russia-Ukraine war; ii) a significant net public asset position, driven by savings accumulated through its sovereign wealth fund, the Government Pension Fund Global; 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 income per capita. These factors increase the country’s resilience to economic shocks and strong inflationary pressures, providing the government with fiscal space to support the economy with appropriate countercyclical fiscal measures.

Norway’s economy rebounded rapidly from the Covid-19 pandemic. After a mild contraction of 0.7% in 2020, GDP grew by 3.9% in 2021 and 3.3% in 2022. The strong rebound resulted in record-high employment, capacity constraints and labour shortages. As a result of Norway’s tight monetary policy, Scope expects inflation to gradually decline, capacity constraints to ease and unemployment to rise from its low base. Economic growth in 2023 is likely to be slower as higher interest rates dampen investments and private consumption as real disposable income and purchasing power are eroded by high inflation. Scope expects mainland GDP to increase by 1.0% in 2023 and by 1.7% in 2024.

Challenges relate to: i) high household debt and imbalances in the residential and commercial real estate sectors in a context of high property prices and rising interest rates; and ii) the long-term transition to a non-commodity-dependent economy, which exposes Norway to stranded asset risks.

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-run net public and external asset positions; ii) a financial crisis, potentially exacerbated by domestic imbalances, materially damaged Norway’s government 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 on the government’s balance sheet.

For the updated report accompanying this review, click here.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Rating Methodology, 27 September 2022) 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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