Norway is an outlier when it comes to Western economies. It is a well-run, fiscally prudent country that takes full advantage of its natural resources. Here are some of its key statistics of the past couple of decades:

  • Very low unemployment (average 3 to 3.5%) – even at times of global crisis the high is only around 4.5%.
  • Runs a budget surplus every single year – ranging from 4% up to a staggering 17%.
  • Stable GDP growth rate (0 to 5% YoY) in a non-crisis environment, but also quite resilient during crisis.
  • Healthy, well above EU average inflation rate – currently running at over 4% YoY.
  • Sovereign Wealth Fund worth around $890bn – that’s roughly $175k per Norwegian citizen.
  • Positive trade balance every single year.
  • Healthy and manageable Debt/GDP ratio – historically between 30%-50% of GDP, currently just above 30%.
  • Steadily increasing FX reserves.

The Norwegian Kroner has suffered heavy losses in the past 18 months, mainly due to the heavy losses sustained by oil. Oil & gas account for roughly a quarter of Norway’s GDP so it’s an important driver to its economy but it’s clear that the Kroner has suffered disproportionately. There is more to Norway’s economy than oil and as such treating it as an oil proxy currency is dangerous. Oil prices seem to have held over $40 and are recently seeing a move higher – this will certainly have a positive and stabilizing effect to the Norwegian economy.

Norges Bank (the Norway central bank) has recently changed its dovish rhetoric, explicitly stating that negative rates are out of the question. Interest rates at an all-time low of 0.5% and the central bank’s easing bias is complete. Norges Bank is known for its aggressiveness in both sides of the monetary cycles and they proved that by proactively easing in the face of collapsing oil prices. They will not hesitate to act when the economy continues to show positive momentum.

NOK is currently at the top end (i.e. weakest) of the past 20-year range both vs. USD and EUR. Furthermore, it’s sitting at very important support levels against both currencies. We believe that the period of NOK weakness is over and once support is broken we will be at the start of a significant positive correction.