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Global Credit Research - 09 Aug 2012
London, 09 August 2012 -- In its annual credit report on Norway, Moody's Investors Service
says that Norway's Aaa government bond rating and stable outlook
reflects the government's prudent policies and robust balance sheet,
underpinned by substantial hydrocarbon reserves and the world's
second-largest sovereign wealth fund. However, the
rating agency notes the potential risk from high levels of household indebtedness.
The rating agency's report is an annual update to the markets and does
not constitute a rating action.
Moody's determines a country's sovereign rating by assessing it on the
basis of four key factors -- economic strength, institutional
strength, government financial strength and susceptibility to event
risk -- as well as the interplay between them.
Moody's assessment of Norway's very high economic strength
reflects Norway's status as one of the world's richest economies,
with the third-highest per capita GDP. Although Norway's
oil production appears to have peaked, with around half of the expected
recoverable oil resources already extracted, natural gas production
continues to rise. The country has also been gaining global market
share in sectors unrelated to the hydrocarbons sector, such as food,
metals, arms and aircraft parts.
Norway's institutional strength is one of the highest in our rating
universe. Norway scores in the 95.7th percentile of the
World Bank's indicator of "Government Effectiveness"
and in the 99.1th percentile regarding "Rule of Law".
Moody's considers Norway's willingness and ability to honour
its obligations to be very high, given the country's unblemished
track record of timely payments.
Moody's assesses Norway's government financial strength as
high, even when compared with other Aaa-rated countries.
The government is a substantial net creditor, both domestically
and externally, as a result of prudent utilisation of its significant
hydrocarbon reserves, and the country's net international
investment position in 2010 was equivalent to around 97% of GDP.
Moody's assesses Norway's susceptibility to event risk as
being very low. The political risks are very low due to the country's
consensus-driven political framework, which has shown itself
to be quite forward-thinking in addressing the country's
long-term economic and fiscal challenges. Norway's
economic risks are also very low, as the population is relatively
wealthy, the economy is large, the external accounts are in
surplus and the country's net international investment position
is strong. However, Moody's notes that the Norwegian
household sector is one of the most indebted among the advanced economies.
Norwegians receive a large tax subsidy for housing, which promotes
over-investment in property and the accumulation of large amounts
of mortgage debt. However, Moody's notes that households'
ability to service their debts is generally strong. Even during
the Nordic banking crisis of the 1990s, direct losses on loans to
households were limited.
Moody's annual credit report on Norway is now available on www.moodys.com.
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Kilbinder Dosanjh
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
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Bart Oosterveld
MD - Sovereign Risk
Financial Institutions Group
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Moody's issues annual credit report on Norway
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