Norway has accomplished a feat that almost no other Western government in the world has done in recent history. It not only has zero net debt, but it is actually in the black with a total surplus of about $936 billion.
Headlines are now concentrating on the $1 trillion figure just surpassed by the Norwegian sovereign wealth fund, which indeed is an incredible feat for a government, an entity generally considered to be the epitome of fiscal profligacy. But even more impressive than the $1 trillion reached in its sovereign wealth fund, the real accomplishment is Norwegian government debt is only 500 billion krone, or about $64 billion at current exchange rates. Hence the $936 billion surplus.
But it gets even more impressive. Norway’s main export is oil, and the quantity of its exports is only topped by Saudi Arabia. Oil has, of course, been in a bear market since 2014 with some OPEC countries struggling mightily. Even Saudi Arabia itself has been under considerable stress since the oil collapse nearly three years ago. Its own debt to GDP ratio, while still low by Western standards, has grown 8.2 times since 2014. Norway’s debt to GDP has only grown 30% in the same timeframe.
Granted, Norway’s debt to GDP is still higher than Saudi Arabia’s, but this is more a function of the nature of democracy. Democracy tends to breed more and more government debt because voters want more and more handouts. Saudi Arabia, on the other hand, is a monarchy, and monarchs tend to preserve national capital in order to hand it down to their heirs and keep their dynasty rich. In any case, the fact Norway’s debt to GDP (excluding its sovereign wealth fund) has increased much slower than Saudi Arabia’s when both of their chief exports is oil is testament to Norway’s true fiscally conservative nature.
But it gets even more impressive. Over the past 17 years, Norway’s tax rates have actually dropped, both personal and corporate. Personal income tax has fallen from 48% at the turn of the millennium to 38% currently. The corporate tax rate has also dropped appreciably, from 27% in 2014 to 24% currently.
Norway is neither a member of the disintegrating European Union nor the increasingly fragile Eurozone. If and when these economic and political unions collapse, Norway will be relatively unscathed. The implications being when fiscal and monetary stress pops up again in Europe, the Norwegian equity and bond markets have good chances of escaping relatively unscathed.
In other words, Norwegian stocks and bonds should be seen as safe haven assets. Given Norway has nearly $1 trillion at its disposal even after it would theoretically pay all its sovereign debts, in any future monetary or fiscal crisis Norwegian funds like the Global X MSCI Norway ETF (NORW, Financial) seem like the place to be.
Disclosure: No positions.
