Eurozone: Norway is a safe haven

18th May 2012

In a landscape dominated by heavy indebtedness, at a personal, corporate and sovereign level, Norway occupies an enviable position. The housing market provides a great case in point – dominated by owner occupiers who have taken on a manageable level of debt. The whole system is underpinned by the fact that all borrowing costs are deductible from taxable income. The end result is a stable and sustainable housing market.

The same level of intelligence has been applied to national debt, with the Norwegian government using its oil reserves to set up a sovereign wealth fund. The Government still has a substantial stake in its national oil company –Statoil. By managing the oil reserves as opposed to exploiting, the government has managed to have a budget surplus, something of a rarity in Europe. A similar positive picture emerges on the savings ratio, household wealth, employment rates, and real GDP growth.

At a corporate level, there are numerous examples of well-run companies with robust balance sheets, underpinned by low leverage and strong cash-flow generation. Norwegian banks have not endured the torrid time as most other European banks. The management have strived to develop a well-managed mortgage book and focus on lending in areas which they have a core competency. There are other good company examples in the telecoms, energy and food sectors. Management are taking on board the principle of long-term sustainability, not just from a financial perspective, but also encompassing ESG factors – maintaining robust systems of operational management and corporate governance. This augurs well for investors who want European exposure, at a time when it seems the rest of Europe is teetering on the precipice of a financial abyss.

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