Kingdom of Norway: R&I Affirms AAA, Stable

NEWS RELEASE

Jan 18, 2021

R&I Affirms AAA, Stable: Kingdom of Norway

Rating and Investment Information, Inc. (R&I) has announced the following:

ISSUER:	Kingdom of Norway
	Foreign Currency Issuer Rating: AAA, Affirmed
	Rating Outlook: Stable

RATIONALE:

Norway is a welfare state with one of the highest levels of per-capita gross domestic product (GDP) in the world. The economy contracted in 2020 due to a fall in the crude oil price at the start of the year and the COVID-19 pandemic, but has been on a recovery track thanks mainly to the execution of economic measures such as stimulus packages. On the back of petroleum and natural gas-related exports and income from foreign investment, the country maintains robust current account surpluses, with very ample net external assets. There are no major concerns about fiscal management, and the financial system is stable. Based on the evaluation that the country's strength that anchors its high creditworthiness is unlikely to be undermined, R&I has affirmed the Foreign Currency Issuer Rating at AAA.

Quarantine measures in response to the coronavirus crisis dealt a blow to the economy. Thanks to effective infection control and flexible expansion of fiscal spending, the economic slump has been small compared to other major European countries, with an expected strong rebound to a positive growth rate of between 4% to under 5% in 2021. Yet this estimation is based mainly on a scenario in which the pandemic settles down. Uncertainties remain given a second wave of the infections from October 2020 onward.

Norway maintains current account surpluses thanks to ample trade surpluses on exports of petroleum and natural gas, and investment returns. The surplus is unlikely to exceed double-digit levels as a percentage of GDP as it had, but there are no concerns about its external position. Net foreign assets that amount to more than double the size of GDP also underpin the sovereign creditworthiness.

The strength of Norway's fiscal management lies in returns from its sovereign wealth fund, called the Government Pension Fund Global (GPFG). The general government budget was in a substantial deficit in 2020 due to the pandemic, and the government intends to prop up the economy with fiscal stimulus programs in 2021 as well. If economic stagnation does not last long, there should be no particular problem with respect to fiscal management, in R&I's view. With no need to finance fiscal deficits, outstanding general government debt will rise but is expected to remain at a low level.

The government's net financial assets equal almost three times the size of GDP. Although the share of non-resident holdings of government bonds exceeding 60% indicates the need for stable roll-over, little concern has been identified at this stage, given the nature of borrowing and repayment resources. The GPFG's high equity investment ratio suggests that global stock market trends may affect the market value of the fund and in turn the government's fiscal management, which R&I considers as a potential risk factor.

Even amid the coronavirus crisis, the financial system remains stable. There is no problem with the banking sector's lending capacity, nor major concerns about the sector's future soundness considering the capital adequacy ratio and liquidity, among other factors, in R&I's view. Meanwhile, the ratio of household debt, which is among the highest of the member countries of the Organisation for Economic Co-operation and Development, is expected to rise for a while on the back of low interest rates. Continued attention needs to be paid to the income environment of households and interest rate trends.

The primary rating methodology applied to this rating is provided at "R&I's Analytical Approach to Sovereigns". The methodology is available at the web site listed below, together with other rating methodologies that are taken into consideration when assigning the rating.

■Contact	: Sales and Marketing Division, Customer Service Dept.	TEL.+81-(0)[e-mail]
■Media Contact	: Corporate Planning Division (Public Relations)	TEL.[phone]
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Credit ratings are R&I's opinions on an issuer's general capacity to fulfill its financial obligations and the certainty of the fulfillment of its individual obligations as promised (creditworthiness) and are not statements of fact. Further, R&I does not state its opinions about any risks other than credit risk, give advice regarding investment decisions or financial matters, or endorse the merits of any investment.

R&I does not undertake any independent verification of the accuracy or other aspects of the related information when issuing a credit rating and makes no related representations or warranties. R&I is not liable in any way for any damage arising in relation to credit ratings (including amendment or withdrawal thereof). As a general rule, R&I issues a credit rating for a fee paid by the issuer. For details,

please refer to https://www.r-i.co.jp/en/docs/policy/site.html.

© Rating and Investment Information, Inc.

NEWS RELEASE

https://www.r-i.co.jp/en/rating/about/rating_method.html

R&I RATINGS:
ISSUER:	Kingdom of Norway
	Foreign Currency Issuer Rating
RATING:	AAA, Affirmed
RATING OUTLOOK:	Stable

■Contact	: Sales and Marketing Division, Customer Service Dept.	TEL.+81-(0)[e-mail]
■Media Contact	: Corporate Planning Division (Public Relations)	TEL.[phone]
Rating and Investment Information, Inc.	TERRACE SQUARE, 3-22 Kanda Nishikicho, Chiyoda-ku, Tokyo 101-0054, Japan https://www.r-i.co.jp

Credit ratings are R&I's opinions on an issuer's general capacity to fulfill its financial obligations and the certainty of the fulfillment of its individual obligations as promised (creditworthiness) and are not statements of fact. Further, R&I does not state its opinions about any risks other than credit risk, give advice regarding investment decisions or financial matters, or endorse the merits of any investment.

R&I does not undertake any independent verification of the accuracy or other aspects of the related information when issuing a credit rating and makes no related representations or warranties. R&I is not liable in any way for any damage arising in relation to credit ratings (including amendment or withdrawal thereof). As a general rule, R&I issues a credit rating for a fee paid by the issuer. For details,

please refer to https://www.r-i.co.jp/en/docs/policy/site.html.

© Rating and Investment Information, Inc.