Norway: Economic and Political Overview
In this page: Economic Outline | Political Outline | COVID-19 Country Response
Norway's COVID-19-led economic downturn remained limited compared to most European countries, and the country recorded a growth of 3.3% of GDP in 2022 on the back of strong exports. Nevertheless, throughout 2023, economic growth has decelerated to an estimated 2.3%, influenced by persistently high inflation and escalating interest rates, which have exerted pressure on domestic demand. The increased cost of living has resulted in a weakened private consumption sector and housing investment has experienced a substantial decline, attributable to elevated construction costs and diminished growth in house prices. The pace of business investment growth has also slowed down. The IMF projects a further deceleration in 2024 (1.5%) and 2025 (1.2%).
Norway’s public finances are sound. The 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. In 2023, the debt-to-GDP ratio was estimated at 37.4%, down from 37.1% one year earlier (IMF). The ratio is expected to follow a downward trend over the forecast horizon, at around 36.2% (IMF). According to the latest estimates by the OECD, Norway's overall budget surplus, including petroleum revenues, stood at 26% of GDP in 2023. The government estimates the structural non-oil budget deficit at 9.9% of mainland trend GDP in 2023 with an increase to 10.3% in 2024. The 2024 draft budget proposes a 0.4% increase in petroleum revenue spending, which involves transfers from the oil fund to the budget, relative to the mainland trend GDP. Headline inflation was on a downward trajectory in 2023 (at 5.8% as per the IMF), primarily driven by reduced electricity prices, and is expected to continue easing. However, underlying inflation is expected to decrease at a slower pace, as it is influenced by wage pressures and the delayed impact of the Norwegian currency's weakening. For this year and the next, inflation is projected at 3.7% and 2.6%, respectively.
Norway is a rich country, with one of the highest GDP per capita in the world (USD 82,236 PPP in 2023 by the IMF). The nation also scores at the top of the United Nations Human Development Index ranking. Unemployment stood at 3.6% in 2023 and the labour market remained tight. The unemployment rate is expected to rise as economic activity softens, but to remain around its pre-pandemic level (at 3.8% over the forecast horizon – IMF), while a still-tight labour market should keep wage growth strong.
| Main Indicators | 2022 | 2023 (E) | 2024 (E) | 2025 (E) | 2026 (E) |
|---|---|---|---|---|---|
| GDP (billions USD) | 593.73 | 485.51 | 526.95 | 554.78 | 564.34 |
| GDP (Constant Prices, Annual % Change) | 3.0 | 0.5 | 1.5 | 1.9 | 1.7 |
| GDP per Capita (USD) | 108,439 | 87,739 | 94,660 | 99,064 | 100,171 |
| General Government Balance (in % of GDP) | -9.5 | -9.6 | -10.1 | -10.3 | -10.2 |
| General Government Gross Debt (in % of GDP) | 36.3 | 41.8 | 38.0 | 35.5 | 34.3 |
| Inflation Rate (%) | 5.8 | 5.5 | 3.3 | 2.6 | 2.0 |
| Unemployment Rate (% of the Labour Force) | 3.3 | 3.6 | 3.8 | 3.8 | 3.8 |
| Current Account (billions USD) | 179.10 | 86.06 | 102.59 | 114.69 | 105.07 |
| Current Account (in % of GDP) | 30.2 | 17.7 | 19.5 | 20.7 | 18.6 |
Source: IMF – World Economic Outlook Database, Latest data available.
Note : (E) Estimated data
Agriculture accounts for 1.5% of Norway’s 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 38,076 agricultural holdings (of which 1,954 are certified organic farming holdings - Statistics Norway) and is more than self-sufficient in animal products, livestock being one of the major agricultural subsectors. However, Norway remains dependent on imports for cereal crops (soybeans, wheat, rapeseed and bananas). About 33.4% of Norway’s total land area is covered by forests, 12.6 million ha in total. The country’s seafood exports totalled a record NOK 151.4 billion (2.9 million tonnes), up by 25% from one year earlier, with salmon exports exceeding NOK 100 billion.
Industry employs 19% of the workforce and represents 48.7% 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 economy, now provide less than 4% of GDP, well below its peak level in 2000. Nevertheless, the oil and gas sector is Norway's largest measured in terms of value-added, government revenues, investments and export value. The government’s total net cash flow from the petroleum industry was estimated to be NOK 903 billion in 2022, NOK 382 billion lower compared to the net cash flow in 2022, which was fuelled by high prices of oil and gas amid the Russia-Ukraine conflict. Manufacturing accounts for 5% 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%) and accounts for 42.2% of GDP. According to Statistics Norway, there were 36.1 million guest nights in 2022, one-third higher than the previous year. As per the Norwegian banking sector, it is comprised of 136 banks of which 118 are local banks and 18 are branches of foreign banks. The market share of the subsidiaries and branches of foreign banks were 24% and 37% in the retail and domestic corporate markets, respectively (European Banking Federation, latest data available).
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
|---|---|---|---|
| Employment By Sector (in % of Total Employment) | 2.3 | 19.2 | 78.5 |
| Value Added (in % of GDP) | 1.6 | 48.7 | 42.1 |
| Value Added (Annual % Change) | 2.0 | 0.3 | 5.5 |
Source: World Bank, Latest data available.
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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.
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
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.
Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024
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The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).
The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.
Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House
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