The balance of trade in goods and services, also known as the trade balance, showed a surplus of NOK 237 billion in the first quarter of 2023, down from NOK 372 billion observed in the first quarter of last year. The reduction in the trade balance surplus was thus 36 per cent. The fall is particularly driven by moderating energy prices, compared to the levels seen through 2022. Despite a lower surplus on the trade balance, the surplus was historically high in the first quarter.
From the end of the first quarter last year to the end of the first quarter this year, the Norwegian krone has weakened by 14 per cent measured by the import-weighted krone exchange rate index.
In isolation, exchange rate developments affect exports positively and imports negatively. Lower petroleum prices caused the price of Norwegian exports to fall, while the price of Norwegian imports increased, which led to a weakened terms of trade vis-a-vis abroad and a lower surplus on the trade balance.
In total, Norway exported goods and services worth NOK 626 billion in the first quarter of 2023. This is a drop of NOK 75 billion compared to the same period the previous year, which amounts to a percentage drop of 11 per cent for Norwegian exports. Export of goods fell by 16 percent, while the export of services increased by 22 per cent.
In comparison, Norway imported goods and services worth NOK 388 billion in the first quarter of 2023. Imports thus increased by 18 per cent. Imports of goods grew by 12 per cent, while imports of services increased by 34 per cent compared to the same period the previous year.
The stronger growth in service imports is largely due to increased travel traffic and increased imports of transport services. Business services, such as auditing and legal services, also contributed to the growth in service imports.
For more information about exports and imports, including price and volume considerations and seasonal adjustments, please see the quarterly national accounts.
Stronger balance of income and current transfers
The interest and current transfers balance showed a surplus of NOK 42 billion in the first quarter of 2023, NOK 22 billion higher than in the same period in 2022. The surplus on the income and current transfers amounted to 5 per cent of Mainland Norway's GDP in the first quarter of 2023.
Interest payments show strong growth on both the expenditure and income side. Norway's interest income was NOK 71 billion in the first quarter, up from NOK 28 billion in the same period last year. Norway's interest expenses were NOK 56 billion, up from NOK 18 billion in the first quarter of 2022. Higher interest rates in Norway and internationally are the reason for the increase in interest payments.
The figure shows (1) the Balance of goods and services, (2) the Balance of income and current transfers and (3) the current account balance (1+2).
Record high increase in net foreign assets
Norway’s net foreign assets, or net International Investment Position (IIP), amounted to 13 690 billion NOK at the end of the 1st quarter of 2023. Net assets were estimated at 11 624 billion NOK at the end of the 4th quarter of 2022 and thus increased by 2 066 billion NOK or 18 percent during the 1st quarter of 2023.
The Government Pension Fund Global (GPFG) accounts for a large part of Norway’s net foreign assets. The fund is part of the sector General Government, which also consists of local government and the rest of central government excluding GPFG. The General Government accounts for 91 percent of the increase in net assets on foreign countries. Net assets on foreign countries are Norway’s assets minus liabilities and reflects the difference between how much foreign debtors owe Norwegian investors and how much Norwegian debtors owe foreign investors.
The figure shows the development in Norway's net foreign assets, net lending and net other changes.
Large net gains
Figure 2 shows that 85 percent of the increase in Norway’s net assets on foreign countries in the 1st quarter of 2023 comes from other changes, which include changes in exchange rates and changes in market prices. This quarter, changes in market and exchange rates went in the same direction, explaining the extraordinary increase in Norway’s net foreign assets.
In the 1st quarter of 2023, the Norwegian krone (NOK) depreciated towards currencies of many of the countries we invest most in. For example, NOK has fallen by 8,4 percent measured in relation to euro. The weakening of the NOK increases the value of foreign currencies in NOK. Since Norway’s foreign assets are investments in foreign currency, the weakening of the NOK will increase the value of foreign assets measured in NOK. A large part of Norway’s liabilities to foreign countries are held in foreign currency as well, but since we have such a large positive net IIP, the exchange rate effect will be in Norway’s favor.
Large net financial transactions
Net financial transactions were also high this quarter, compared to previous quarters. The financial account shows a net lending of 305 billion NOK. Here too, it was the GPFG that played the key role, as the fund increased investments abroad and at the same time reduced foreign debt this quarter.