Rating action

Scope Ratings GmbH (Scope) has today affirmed the Kingdom of Norway’s long-term issuer and senior unsecured debt ratings at AAA in both local and foreign currency and maintained the Stable Outlook. The short-term issuer rating has been affirmed at S-1+ in both local and foreign currency with Stable Outlook.

The affirmation of Norway’s credit ratings reflects the country’s economic resilience and expected continued overall general government fiscal surpluses over coming years. Norway has one of the world’s highest per capita income levels and benefits from low central government debt, issued only to finance capital expenditure. The significant net public asset position, driven by savings accumulated through its sovereign wealth fund, the Government Pension Fund Global (GPFG) is an additional significant credit strength. Moreover, strong fiscal, monetary and financial governance institutions further support the ratings.

The main credit challenges relate to i) high household debt and imbalances in the real estate sector and ii) long-term transition risks from reducing commodity dependence and shifting toward a more diversified economic structure.

For the updated rating report, click here.

Key rating drivers

Economic resilience and solid growth outlook. Economic output in Norway has proven resilient during recent crises. Mainland GDP remains above its long-term trend and was 7.4% above pre-pandemic levels in Q1 2025, broadly in line with other highly rated peers such as Sweden (+4.2%), Denmark (+9.1%), the Netherlands (+8.8%) and Switzerland (+9%). Still elevated inflation and high interest rates in the past two years curbed private consumption and investments, particularly in the housing sector. This resulted in subdued mainland GDP growth of 0.7% and 0.6% in 2023 and 2024, respectively¹. After having declined by 0.4% in Q4 2024, mainland GDP increased by 1% in Q1 2025. Wage growth outpaced inflation in 2024, resulting in real wage increase of around 3%, fostering a gradual recovery in consumption and housing investments. Nevertheless, inflation remained elevated at 3% in May 2025 and Norges Bank cut interest rates by only 25bps in June 2025 to 4.25%. High oil industry activity and expansionary fiscal policy further support growth. The labour market continues to show resilience, with still elevated vacancies and employment rate at 69.7% in May 2025. The unemployment rate remained low at 4.1% in Q1 2025, slightly up from 3.8% in Q4 2024, but broadly in line with pre-pandemic levels.

Potential negative impacts stemming from higher US tariffs and overall heightened global trade uncertainty remains are likely to be limited for Norway. This is mostly due to limited trade links with the US – accounting for 3% of total Norwegian exports – and the prevalence of less sensitive exports such as oil and gas. Some headwinds, however, could stem from the economic slowdown in main EU trading partners. Scope expects solid wage growth, gradually easing inflationary pressures, together with sustained public and private consumption and oil industry activity to support total GDP growth, projected at 1.8% in 2025 and 1.4% in 2026, before converging towards Norway’s growth potential of around 1.8%.

Strong public finances, supported by GPFG. Under Norway’s fiscal framework, revenues from the petroleum sector are saved in the GPFG, and the non-oil budget deficit is set to correspond to 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 only exceeded net petroleum revenues on two occasions – in 2016/17 during a slump in oil prices and in 2020/21 due to the increased spending needed to respond to the Covid-19 pandemic. The revised 2025 budget estimates a structural non-oil fiscal deficit of NOK 542bn, corresponding to 2.7% of the Government Pension Fund Global’s value. This amount includes also NOK 50bn military support to Ukraine which, however, is not expected to affect Norway’s economic activity. Excluding the military support to Ukraine, the structural non-oil fiscal deficit is estimated at NOK 492bn (11.7% of mainland GDP), up from NOK 418.7 in 2024². The Government has recently committed to increase national defence spending to 5% by 2030-2035, from 2.2% in 2024³. Nevertheless, overall headline fiscal balances including the oil sector are expected to remain in surplus of around 10% of GDP over the next five years. As a result, Scope expects the debt-to-GDP ratio to increase slightly from 42.7% in 2024 to 43.8% this year, before gradually declining to around 41% by 2030.

Large net public asset position driven by savings accumulated through the sovereign wealth fund. Norway benefits from a significant net public asset position as a result of savings accumulated through the GPFG over the past decades. Net financial assets reached a record high of 425% of GDP in Q3 2024, before moderately declining to 381% of GDP in Q1 2025, marking by far the highest net asset ratio among AAA-rated peers. Since its launch in 1990, the GPFG has grown to about USD 1.8trn as of end 2024, or around 487% of 2024 mainland GDP. Fund assets are invested abroad, and the divestment of oil and gas shares in recent years has helped diversify the country’s wealth away from the sector. The prudent investment of Norway’s oil and gas wealth, combined with the fiscal rule targeting annual transfers to the budget of no more than 3% of GPFG assets, is a significant credit strength. The NOK 3,985bn increase in the fund’s market value in 2024 compared to 2023 was driven by a strong return on investments (NOK 2,515bn), particularly on equity such as US tech stocks, oil revenue transfers from the government (NOK 409bn) and a weaker krone (NOK 1,072bn)⁴. Using the fund to delink the generation and use of petroleum revenues bolsters fiscal and economic sustainability. It provides a formidable tool for business cycle smoothing, eases the effects of oil price volatility on the mainland economy, decreases the potential for short-term overspending and provides the foundation for long-term investments to benefit future generations.

Rating challenges: high household debt and imbalances in the real estate sector, and challenges concerning the long-run transition to a non-commodity-dependent economy

Elevated household debt and exposure to commercial real estate (CRE) firms are longstanding vulnerabilities of the Norwegian financial system. Due to the small size of the government bond market in Norway, banks rely heavily on covered bonds, largely secured against residential mortgages, which make up more than half of Norwegian banks’ liquidity reserves. Despite the sharp rise in interest rates, house prices continued to increase steadily during 2024 and Q1 2025, reaching a new peak in February 2025, with 7.5% YoY increase. Since then, the monthly rate of increase has started to decelerate, although house prices remain 30% above pre-Covid levels as of June 2025. Residential investment is set to continue increasing over the next year driven by gradually falling interest rates and rising home prices.

Real estate sector risks are intertwined with high levels of household debt, mostly consisting of mortgage loans. The household debt ratio reached a peak at 251% of disposable income in Q4 2023, before starting to decline gradually to 231% as of Q1 2025. Still, higher interest rates and the high share of Norwegian households with floating rate mortgages have pushed the interest burden from 4.0% of disposable income on average in 2021 to 8.8% on average in 2024, marginally declining to 8.4% in Q2 2025. High debt levels also contributed to a sharp rise in the debt service ratio (i.e. the share of income used to service debt) for Norwegian households up from around 15% in 2021 to around 21% by end-2024, well above other highly rated peers such as Sweden (12.6%), Denmark (12.4%) or the Netherlands (13.5%). This increase coincided with government efforts to address high private sector debt by extending the lending regulation, which includes required principal payments to consumer loans with collateral other than real estate. Nevertheless, in December 2024 the government decided to revise the maximum loan-to-value ratio, increasing it from 85% to 90%, in order to encourage private borrowings and foster activity in the construction sector. Households remain vulnerable to a sustained period of high interest rates or an economic downturn with rising unemployment.

Banks’ high exposure to commercial real estate is another important vulnerability. CRE exposures are high at all large banks, accounting for around half of total corporate lending. CRE companies tend to have higher leverage compared to other firms and higher refinancing risks from the short maturities of new commercial property mortgages. Losses in this sector could therefore result in material negative impacts on banks’ balance sheets and cause substantial downturns in the financial market. Norwegian banks’ overall exposures to export-oriented industries which are more vulnerable to trade restrictions – such as fishing, shipping, manufacturing and wholesale trade - remains moderate, accounting for just above 15% of banks corporate lending. To date, banking sector resilience is supported by solid profitability, comfortable capital buffers that provide resilience to severe stress scenarios, a systemic risk buffer set at 4.5% and a 2.5% countercyclical risk buffer set at one of the highest rates in Europe⁵.

Despite strong capital buffers and stable profitability in the banking sector, elevated household debt, rising real estate exposures, and policy shifts aimed at stimulating credit leave the financial system vulnerable to adverse shocks amid an uncertain interest rate and macroeconomic environment.

Finally, Norway remains highly reliant on the oil and gas sector, exposing it to long-term transition challenges such as stranded asset risks as its main trading partners gradually transition away from fossil fuels. However, the decision to continue oil exploration is strongly supported by EU member states, which have strengthened energy cooperation with Norway. As one of the main alternative energy suppliers to Russia, Norway’s share of gas imports to the EU has steadily improved over the past years, from 24% in 2021 to almost 53% in Q1 2025. The decision to divest companies solely dedicated to oil and gas exploration and production from the GPFG’s benchmark index also helps diversify the country’s wealth away from the sector.

While Norway’s role as a key energy supplier to Europe supports its external position in the near term, its continued reliance on fossil fuels underscores the importance of managing long-term transition risks and aligning wealth diversification with global decarbonisation trends.

Rating-change drivers

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

Downside scenarios for the ratings and Outlooks are if (individually or collectively):

1. Macroeconomic policy weakened significantly, threatening Norway’s long-run net public and external asset positions; and/or
    
2. A financial crisis, potentially exacerbated by domestic imbalances, materially damaged Norway’s public sector and financial system balance sheets.

Sovereign Quantitative Model (SQM) and Qualitative Scorecard (QS)

Scope’s SQM, which assesses core sovereign credit fundamentals, signals a first indicative credit rating of ‘aaa’ for Norway. Under Scope’s methodology, this initial indicative rating receives: i) no further adjustment from the methodological reserve-currency adjustment; and ii) no negative adjustment from the methodological political-risk quantitative adjustment. On such a basis, a final SQM quantitative rating of ‘aaa’ is assigned for Norway and reviewed by the Qualitative Scorecard (QS) where this rating can be adjusted by up to three notches up or down depending on the significance of Norway’s qualitative credit strengths or weaknesses compared against an SQM-assigned peer group of sovereigns.

Scope identified the following relative credit strengths of Norway via the QS: i) monetary policy framework; ii) fiscal policy framework; iii) long-term debt trajectory; iv) debt profile and market access; v) strong resilience to short-term external shocks; vi) low social risks; and vii) low governance risks. No relative credit weaknesses were identified. On aggregate, the QS generates a one-notch positive adjustment for Norway’s credit rating, concluding in final AAA long-term issuer ratings.

A rating committee has discussed and confirmed these results.

Environment, social and governance (ESG) factors

Scope explicitly factors in ESG issues in its ratings process via the sovereign-rating methodology’s stand-alone ESG sovereign-risk pillar, which holds a significant 25% weight under the quantitative model (SQM) and 20% weight under the methodology’s qualitative overlay (QS).

Environmental factors are explicitly considered in the rating process via the environment sub-category under the ESG risk pillar. Norway receives high scores in the SQM indicators measuring CO2 emissions per GDP, the exposure and vulnerability to natural disaster risks, and the ecological footprint of consumption compared with available biocapacity. In line with other advanced economies, the country receives a low score for the SQM indicator measuring greenhouse gas (GHG) emissions per capita. Norway aims to reach climate neutrality by 2050, when the sovereign’s wealth fund should also have a net zero emissions portfolio. Carbon taxes are set to increase over coming years and amounted to around EUR 124.14 as of April 2025, below other highly rated sovereigns such as Switzerland (EUR 126.1) and Sweden (EUR 134.1), but above Denmark (EUR 100.5), Germany (EUR 55) and the Netherlands (EUR 87.9). Scope assesses Norway’s QS adjustment for ‘environmental factors’ as ‘neutral’ given the significant medium-term transition risks towards a non-commodity-dependent economy. The Norwegian Offshore Directorate expects a gradual decline in petroleum production over the coming decades, though the pace of decline heavily depends on exploration activity and technological development. Under a base scenario, net cash flows from Norwegian petroleum activities from 2025 until 2050 would amount to around NOK 9tn (222% of 2024 mainland GDP). Alternative scenarios range from around NOK 3tn (74% of GDP) in a low-price-low-production scenario entailing a complete dismantling of the petroleum industry, to NOK 18tn (444% of GDP) in a high-price-high-production scenario.

Factors related to Norway’s social profile are captured in Scope’s SQM, where the country benefits from its high labour force participation and achieves the highest score among highly-rated peers for its low-income inequality. As most developed economies, Norway faces an ageing population and increasing old-age dependency ratio, although long-run demographic trends compare still favourably vis-à-vis some peers, such as Germany and the Netherlands. The country ranked second after Switzerland in the United Nation’s 2023 Human Development Index – an indicator predicated on life expectancies, educational achievement and income levels. Scope’s QS assessment of Norway’s ‘social factors’ is ‘strong’, mostly reflecting the country’s strong social safety net and inclusive labour market.

Governance-related factors are explicitly captured in Scope’s assessment of a composite index of five World Bank Worldwide Governance Indicators where Norway has the highest score in Scope’s rated sovereign universe. Following parliamentary elections in September 2021, Labour Party candidate Jonas Gahr Støre became the head of a centre-left coalition minority government with the Centre Party. In January 2025, the Centre Party withdrew from the coalition over disputes about the implementation of EU energy directives. This led to the formation of the current single-party Labour minority government. Scope evaluates Norway’s ’governance’ profile as ‘strong’ in its qualitative assessment, reflecting the historical consensus-driven political system and a tradition of minority governments. Scope expects broad continuity in Norway’s main policy areas, including the management of petroleum revenues. The next parliamentary elections are scheduled for September 2025.

Rating committee
The main points discussed by the rating committee were: i) domestic economic risk; ii) public finance risks, including fiscal framework and debt dynamics; iii) external economic risks, including effects of potential US tariffs; iv) financial stability risks, including housing market and private sector debt; v) ESG considerations; and vi) peer developments.

Rating driver references
1. Norges Bank
2. Ministry of Finance
3. Office of the Prime Minister – Ministry of Defence
4. Norges Bank Investment Management
5. Norges Bank

Methodology
The methodology used for these Credit Ratings and Outlooks, (Sovereign Rating Methodology, 27 January 2025), is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The model used for these Credit Ratings and/or Outlooks is (Sovereign Quantitative Model Version 4.0), available in Scope Ratings’ list of models, published under https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Credit Ratings were not requested by the Rated Entity or its Related Third Parties. The Credit Rating process was conducted:
With Rated Entity or Related Third Party participation     NO
With access to internal documents                                   NO
With access to management                                            NO
The following substantially material sources of information were used to prepare the Credit Ratings: public domain and Scope Ratings’ internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and Outlooks and the principal grounds on which the Credit Ratings and Outlooks are based. Following that review, the Credit Ratings and Outlooks were not amended before being issued.

Regulatory disclosures
These Credit Ratings and Outlooks are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and Outlooks are UK-endorsed.
Lead analyst: Alessandra Poli, Analyst
Person responsible for approval of the Credit Ratings: Jakob Suwalski, Executive Director
The Credit Ratings/Outlooks were first released by Scope Ratings in January 2003. The Credit Ratings/Outlooks were last updated on 6 September 2024.

Potential conflicts
See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
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