Norway flag Norway: Economic and Political Overview

The economic context of Norway

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Norway's Covid-19-led economic downturn remained limited compared to most European countries: after losing only 0.8% in the aftermath of the pandemic, the country’s GDP was estimated at +3% in 2021, thanks to a strong rebound in private consumption and an increase in employment, which offset declining investments. Benefitting from higher oil and gas prices (Norway’s main exports), from 2022 economic output is projected to be running slightly above the pre-pandemic path. The economy is forecast to grow by 4.1% this year, before slowing to 2.9% in 2023 (IMF), although uncertainty remains due to the new waves of the pandemic and to the historically high household debt level.

The general government balance was estimated at -12.6% in 2021 by the IMF, as Norway’s public finances rely heavily on oil and gas output. The projections envisage a substantial decrease in the oil-adjusted fiscal deficit in 2022, with a forecast of -10.7% (followed by -10% in 2023). Norway's government gross debt did not expand substantially in the aftermath of the Covid-19 crisis unlike in the rest of Europe, despite public monetary support and a comprehensive loan programme to the banks. The debt-to-GDP ratio stood at 42.7% in 2021 and is expected to follow a downward trend over the forecast horizon (42.4% and 41.8% in 2022 and 2023, respectively). The value of Norway's Sovereign Wealth Fund remains the world’s largest, being valued at over USD 1.4 trillion at the end of 2021. The Norwegian fund invests in more than 9,100 companies worldwide. Inflation was on an upward trend in 2021 (+2.6% from 1.3% one year earlier), triggering Norges Bank’s Executive Board decision to raise the key policy rate from the historic low of 0.0% to 0.25%. The IMF expects inflation to stabilize around 2% over the forecast period.

Norway is a rich country, with one of the highest GDP per capita in the world (estimated at USD 69,171 PPP in 2021 by the IMF). The nation also scores at the top of the United Nations Development Programme’s Human Development Index ranking. Unemployment grew only slightly in 2021 (at 4.3%), already exceeding pre-pandemic levels. In line with the economic recovery, employment is set to continue increasing, while the rate of unemployment should fall further to 4% this year and 3.9% in 2023 (IMF).

 
Main Indicators 20202021 (e)2022 (e)2023 (e)2024 (e)
GDP (billions USD) 362.20482.18504.70486.37495.14
GDP (Constant Prices, Annual % Change) -0.73.93.62.62.2
GDP per Capita (USD) 6789928889
General Government Balance (in % of GDP) -12.3-10.1-8.6-8.1-8.2
General Government Gross Debt (in % of GDP) 46.843.440.339.539.2
Inflation Rate (%) 1.33.54.73.82.7
Unemployment Rate (% of the Labour Force) 4.64.43.93.83.7
Current Account (billions USD) 4.0372.1297.9470.7655.82
Current Account (in % of GDP) 1.115.019.414.511.3

Source: IMF – World Economic Outlook Database, October 2021

Note: (e) Estimated Data

Main Sectors of Industry

Agriculture accounts for 1.9% of GDP and employs 2% of the workforce (World bank, latest data available). Fishing is an important activity as Norway is the world's second-biggest seafood exporter after China. Agricultural subsidies are very significant. The country counts 38,713 agricultural holdings (Statistics Norway) and is more than self-sufficient in animal products, livestock being one of the major agricultural products. However, Norway remains dependent on imports for cereal crops (soybeans, wheat, rapeseed and bananas). About 39% of Norway’s total land area is covered by forests, 12.6 million ha in total.

Industry employs 19.4% of the workforce and represents 25.9% of GDP. Norway’s economy depends on its natural resources and energy sources (oil, gas, hydraulic energy, forests and minerals). Oil rents, which have once dominated the GDP, now provide less than 4% of GDP, well below its peak level in 2000. Manufacturing alone accounts for 6.6% of GDP. Shipbuilding, metals, wood pulp and paper, the chemical industry, machinery and electrical equipment make up Norway’s main manufacturing industries. Norway also has one of the largest and most modern fleets in the world.

The Norwegian service sector is highly developed; it employs over three-quarters of the population (78.5%) and accounts for 60.4% of GDP, a share that has been increasing in recent years. According to the World Travel & Tourism Council (WTTC), travel and tourism in Norway generated, directly and indirectly, roughly 4.6% of GDP in 2020 (latest data available). The Norwegian banking sector is comprised of 134 banks, of which 118 local banks and 16 branches of foreign banks. The market share of the subsidiaries and branches of foreign banks were 24% and 38% in the retail and domestic corporate market, respectively (European Banking Federation, latest data available).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 2.0 19.4 78.5
Value Added (in % of GDP) 1.9 25.9 60.4
Value Added (Annual % Change) 0.2 3.7 -2.8

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
73,4/100
World Rank:
28
Regional Rank:
15

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
8.28/10
World Rank:
12/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Country Risk

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Latest Update: November 2022

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