Norway

World Rank: 28 Regional Rank: 15 of 43

Norway

Ten Economic Freedoms of Norway

88.1 Business Freedom Avg. 64.3 60.0 Investment Freedom Avg 48.8
89.2 Trade Freedom Avg. 73.2 60.0 Financial Freedom Avg 49.1
50.3 Fiscal Freedom Avg. 74.9 90.0 Property Rights Avg 44.0
50.5 Government Size Avg. 65.0 87.0 Fdm. from Corruption Avg 40.3
78.1 Monetary Freedom Avg. 74.0 48.6 Labor Freedom Avg 61.3

Quick Facts

Population:
  • 4.7 million
GDP (PPP):
  • $233.4 billion
  • 2.5% growth in 2006
  • 2.3% 5-year compound annual growth
  • $50,078 per capita
Unemployment:
  • 2.5%
Inflation (CPI):
  • 0.8%
FDI Inflow:
  • $5.9 billion

Norway's economic freedom score is 70.2, making its economy the 28th freest in the 2009 Index. Its overall score increased by 1.6 points from last year, reflecting improvements in four of the 10 economic freedoms, particularly financial freedom. Norway is ranked 15th out of 43 countries in the Europe region, and its overall score is well above the world and regional averages.

Norway has long benefited from its openness to global commerce. Achieving high levels of success in many of the 10 economic freedoms, the Norwegian economy enjoys vibrant entrepreneurial activity and high levels of prosperity. Starting a business takes only a few days, and the overall security of business operations is high. Monetary stability is well maintained. Foreign investment is welcome, although some policies tend to favor Norwegian and EU interests. Norway's efficient, independent judiciary protects property rights effectively, and corruption is minimal.

Norway has low scores in government size, fiscal freedom, and labor freedom. Government spending is high as a percentage of GDP, and state ownership in various industries remains heavy. As in most other modern European welfare economies, the labor market is fairly rigid, but the government has been trying to introduce more flexibility into employment practices.


Background Back to the top

Norway, a land of mountains, tundra, forests, and snowfields located on the Arctic Circle, has almost no agricultural land but is nonetheless one of the world's most prosperous countries. Fisheries, metal, and oil are the most important sectors. The government saves a large portion of its oil revenues in investment funds outside of the country as insurance against depleting reserves. Norwegian voters have rejected membership in the European Union in two referenda, and the question is not expected to be reopened before 2009. Instead, Norway maintains close economic interaction with EU members under the European Economic Area agreement. Norway has been a member of NATO since 1949.


Business Freedom 88.1 Back to the top

The overall freedom to start, operate, and close a business is strongly protected under Norway's regulatory environment. Starting a business takes an average of 10 days, compared to the world average of 38 days. Obtaining a business license requires less than the world average of 18 procedures. Bankruptcy proceedings are simple and straightforward.


Trade Freedom 89.2 Back to the top

Norway's weighted average tariff rate was 0.4 percent in 2006. Import bans and quotas, import licensing requirements, restrictive pharmaceutical and biotechnology policies, agriculture and manufacturing subsidies, and inconsistent enforcement of intellectual property rights add to the cost of trade. Ten points were deducted from Norway's trade freedom score to account for non-tariff barriers.


Fiscal Freedom 50.3 Back to the top

Norway has a high income tax rate and a moderate corporate tax rate. The top income tax rate is 47.8 percent, and the flat corporate tax rate is 28 percent. Other taxes include a value-added tax (VAT), a tax on net wealth, and a number of environmental taxes. In the most recent year, overall tax revenue as a percentage of GDP was 43.6 percent.


Government Size 50.5 Back to the top

Total government expenditures, including consumption and transfer payments, are high. In the most recent year, government spending equaled 40.6 percent of GDP. The government has focused on containing expensive welfare programs in recent years. The state still owns around 50 percent of all industries, including enterprises in manufacturing, telecommunications, and hydroelectric power.


Monetary Freedom78.1 Back to the top

Inflation is low, averaging 1.2 percent between 2005 and 2007. The government regulates prices for agriculture products, sets maximum prices for pharmaceuticals, influences prices through state-owned enterprises and utilities, and subsidizes agriculture and manufacturing. Fifteen points were deducted from Norway's monetary freedom score to account for policies that distort domestic prices.


Investment Freedom60.0 Back to the top

Foreign and domestic investments are treated equally under the law, but regulations, standards, and practices often favor Norwegian, Scandinavian, and European Economic Area investors. The government restricts investment in sectors in which it has a monopoly and in sectors that are considered politically sensitive, such as fishing and maritime transport. Residents and non-residents may hold foreign exchange accounts. The state continues to play an important role in the economy. Regulations and bureaucracy are generally transparent and efficient, but regulations can change suddenly. There are no restrictions on payments, transfers, or repatriation of profits. Foreign investors may own land, subject to various restrictions.


Financial Freedom60.0 Back to the top

Supervision of Norway's well-developed financial system is prudent, and regulations are largely consistent with international norms. Credit is allocated on market terms, and banks offer a wide array of services. The government retains ownership of Norway's largest financial institution, which accounts for 40 percent of assets. Reluctance to allow foreign ownership of the domestic financial sector has been eased in recent years. Since 2004, some restrictions on acquisitions of equity in Norwegian financial institutions have been lifted, but a requirement for approval by the Norwegian Financial Supervisory Authority regarding acquisition of financial institutions that exceed certain thresholds is still in place. Half of a bank's board and corporate assembly must be nationals or permanent residents of Norway or a nation of the European Economic Area. The Ministry of Finance has eliminated remaining barriers to the establishment of branches by foreign financial institutions. The small stock exchange, in which the state and foreigners each hold about one-third of equity, is part of a Baltic'Nordic regional network.


Property Rights90.0 Back to the top

Private property and contracts are secure, and the judiciary is sound. Norway adheres to key international agreements for the protection of intellectual property rights. Internet piracy and cable/satellite decoder and smart-card piracy have risen, and enforcement of IPR protection is spotty. Imports of counterfeit or pirated goods are not expressly banned.


Freedom From Corruption87.0 Back to the top

Corruption is perceived as minimal. Norway ranks 9th out of 179 countries in Transparency International's Corruption Perceptions Index for 2007. Corrupt activity by Norwegian or foreign officials is a criminal offense, and anti-corruption laws subject Norwegian nationals and companies that bribe officials in foreign countries to criminal penalties.


Labor Freedom48.6 Back to the top

Norway's rigid labor regulations hinder employment and productivity growth. The non-salary cost of employing a worker is moderate, but dismissing a redundant employee is relatively difficult and costly. Regulations related to the number of work hours are relatively rigid.


Economic Freedom Score

Norway Economic Freedom Score

Country’s Score Over Time

Bar Graph of Norway Economic Freedom Scores Over a Time Period

Economic Freedom vs. World Avg

Bar Graph of Norway Economic Freedom Scores

Regional Ranking

Rank Country Overall Change
1Ireland82.2-0.3
2Denmark79.60.4
3Switzerland79.4-0.1
4United Kingdom79-0.5
5Netherlands77-0.4
6Estonia76.4-1.5
7Iceland75.90.1
8Luxembourg75.20.5
9Finland74.5-0.1
10Belgium72.10.5
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