Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the cases of sovereigns, sub-sovereigns and supranational organisations that may act as a lender of last resort.

Scope performs monitoring reviews to determine whether material changes and/or changes in macro-economic 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 rating’s 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 announces the result of each monitoring review on its website and/or on its subscription platform ScopeOne.

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 24 February 2025.

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 ratings history can be found on www.scoperatings.com.

Key rating factors

For the updated rating report accompanying this review, please see here.

Norway’s AAA rating is underpinned by the following credit strengths: i) the country’s economic resilience and expected continued overall general government fiscal surpluses; 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 only to finance capital expenditure, and institutional strengths as a mature economy with one of the world’s highest per capita income levels.

Challenges relate to: i) high household debt and imbalances in the real estate sector; and ii) the long-run transition to a non-commodity-dependent economy.

Norway’s economy demonstrated significant resilience during the Covid-19 pandemic and the subsequent energy crisis following the escalation of the Russia-Ukraine war. Total real GDP grew by 3.3% in 2022, but slowed sharply to 0.1% in 2023, before recovering to 2.1% in 2024. This growth was primarily driven by increased public sector demand (including especially spending on defence and social services), substantial investments in the petroleum sector, and a rise in mainland exports. Conversely, a decline in residential and commercial building investments, coupled with subdued private consumption, exerted downward pressure on the economy. While value added growth was recorded in most industries, construction and fishing contributed negatively. Inflation declined significantly in 2024, leading to real wage growth for the first time since 2021. Public sector investments are expected to remain high, while private sector consumption is set to pick up, supported by rising real wages. Total real GDP growth is expected at 1.9% in 2025 and 1.7% in 2026, before converging towards Norway’s estimated growth potential of around 1.8%.

Under Norway’s fiscal framework, revenues from the petroleum sector are saved in the Government Pension Fund Global (GPFG), and the non-oil budget deficit is set in line with the long-term real return on the GPFG, which is estimated at 3%. Since the inception of Norway’s sovereign wealth fund in 1990, transfers from the fund to the central government budget have exceeded net petroleum revenues only twice – in 2016/17 due to a slump in oil prices and in 2020/21, in response to pandemic-related spending. According to the 2025 budget, the structural non-oil fiscal deficit is planned to reach NOK 460.1bn, amounting to 2.5% of GPFG assets after fund spending of NOK 416.5bn in 2024 (or 2.6% of GPFG assets). The proposed withdrawal from the fund is higher in 2025 compared to previous years amid spending pressures, particularly in defense. However, it remains well below the 3% fiscal rule, supported by a strong economic backdrop.

Elevated household debt and the banking sector’s exposure to commercial real estate (CRE) firms remain long-standing vulnerabilities of Norway’s financial system. Household debt is expected to rise further, given the sharp increase in house prices in January 2025, which can be attributed to reduced financial uncertainty for households and strong demand, coupled with low levels of new housing construction. Nevertheless, amid declining policy rates, the household interest burden has likely seen its peak in 2024 and is expected to gradually decline. The Norwegian banking sector remains well-capitalized, with strong liquidity and profitability, providing it with significant capacity to absorb losses. However, high CRE exposures, which account for around half of total corporate lending, pose a structural vulnerability for banks.

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

The ratings/Outlooks 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; and/or ii) a financial crisis, potentially exacerbated by domestic imbalances, materially damaged Norway’s public sector and financial system balance sheets.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Rating Methodology, 27 January 2025) 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 Alessandra Poli, Analyst

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