This is an archived release.
Weakening in households financial position
Households and non-profit institutions net lending continue to increase, but debt is rising compared to both financial assets and disposable income.
Net lending over the last four quarters is estimated to NOK -60 billion in the second quarter of 2008, an increase of almost NOK 11 billion compared to the first quarter. The growth in financial investments has increased to some extent, but investment in financial assets is still much lower than the borrowing in the last four quarter period. The debt growth shows a declining trend since the second quarter of 2007, but credit lines secured on dwellings still contributes to a relative high debt growth rate (see credit indicator C2) . Nearly 80 percent of the loan debt is mortgage loans.
Net financial assets shows a significant fall from the end of first half-year of 2007 to the end of first half-year 2008. The development is explained by the debt growth, holding losses in the securities markets and continued net sales of quoted securities. Net financial assets amounted to almost 37 percent of disposable income by the end of second quarter in 2008 compared to about 51 per cent one year earlier.
Net holding losses in securities markets reduced the value of households’ financial assets by NOK 53 billion in the last four quarter period and in total the net financial assets were reduced by NOK 113 billion. Households’ net financial wealth constituted NOK 370 billion by the end of the second quarter in 2008.
Rise in the value of government owner share in domestic non-financial corporations
The central government net lending over the last four quarters was NOK 454 billion in the second quarter of 2008 which is NOK 2 billion lower than the first quarter of 2008. The governments financial net wealth increased by approximately NOK 138 billion in the last quarter. This is mainly explained by an increase in value of government owner shares in domestic non-financial corporations, but also the total value of Government Pension Fund - Global increased during the second quarter of 2008 due to high financial investments.
Local governments net lending over the last four quarters increased by approximately NOK 3 billion from NOK -21 billion in the first quarter of 2008 to NOK -18 billion in the second quarter of 2008. This increase is mainly explained by a relative high increase in the municipalities’ bank deposits. Local government borrowing fell in the last quarter period with almost NOK 4 billion to NOK 21 billion in the second quarter of 2008. The municipalities issued securities loans to a higher extent in the second quarter of 2008 at the same time as they paid off loans in mortgage companies.
Huge holding losses on foreign assets
Norway’s net financial assets to the rest of the world is estimated to NOK 1 267 billion at the end of second quarter of 2008 compared to NOK 1 305 billion at the end of first quarter of 2008. The fall in net financial assets in the second quarter of 2008 is caused by holding losses on foreign financial assets held by domestic sectors both in securities markets and in the foreign exchange market due to currency exchange rate developments. Rise in stock market prices on Oslo stock-exchange led to holding gains on share owned by foreigners. Net holding loss for Norway amounted to NOK 149 billion in the last quarter. Norway’s net lending to the rest of the world continues to stay at a high level and was NOK 110 billion in the second quarter of 2008.
|2. quarter 2006||3. quarter 2006||4. quarter 2006||1. quarter 2007||2. quarter 2007||3. quarter 2007||4. quarter 2007||1. quarter 2008||1. quarter 2008|
|Financial assets||2 108||2 134||2 230||2 278||2 341||2 359||2 383||2 379||2 411|
|Liabillities||1 661||1 700||1 760||1 786||1 858||1 907||1 957||1 978||2 041|
|Net financial assets/net financial wealth||447||435||470||493||483||452||426||401||370|
|Change in net financial assets/net financial wealth||16||-15||28||10||36||17||-44||-92||-113|
Net lending defined in non - financial accounts ( capital account ) =
saving + net capital transfers - net acquisition of non - financial assets
Net lending defined in financial accounts =
net acquisition of financial assets - net incurrence of liabilities
Savings is non-consumed income and can be invested in financial or non-financial assets. If savings exceed non-financial investments, a sector has surplus of funds and becomes a net lender to other sectors. In the financial transaction account, this means that the sector acquire more financial assets than liabilities. On the other hand, if savings are less than non-financial investments, investments have to be funded either by selling financial assets or incurring debts. Household investments in non-financial assets mainly reflect the purchase of new housing and fixed investments by unincorporated enterprises. They typically finance substantial parts of these investments by incurring debt in the form of loans.
Net financial assets ( net financial wealth ) = total financial assets - total liabilities
The financial balance sheet shows the financial position of a sector at the end of the reference period and is broken down into categories of financial assets and liabilities. Insurance technical reserves, currency and deposits are the predominant assets held by households, while loans provided by financial corporations (banks etc) constitute the main proportion of liabilities.
Changes in net financial asset = net lending + other change in assets , net
The change in the financial balance sheet during the reference period is a result of accumulated financial transactions and other changes in assets. The latter category mainly reflects revaluations due to changes in market prices of financial instruments.