Substantial trade balance surplus

The balance of goods and services showed a surplus of NOK 516 billion in 2021. In the fourth quarter the surplus ended at NOK 257 billion. This is the highest surplus on record. The price level of oil and natural gas in the fourth quarter was twice the level of the fourth quarter in 2020. Revenues from petroleum exports are estimated to be worth NOK 353 billion in Q4. This is NOK 133 billion higher than in the previous quarter and NOK 245 billion more than in the same quarter in 2020. Higher revenues are due to higher oil and natural gas prices. The market price of natural gas in Europe saw substantial growth in the second half of the previous year. Price increases were seen in connection with Asian buyers absorbing lager volumes of Russian natural gas. Furthermore, the green transition, which involves building down coal and nuclear power, is related to the increase in natural gas prices. Finally, renewable power production in the form of wind farms experienced less favorable wind conditions, resulting in higher power prices, and, due to being a substitute, higher natural gas prices. It is quite likely that the level om energy prices, as well as price volatility, will be higher going forward.

An important contributor to a strengthening trade balance during the pandemic has been a reduction in the import of travel. This reduction is mainly due to travel restrictions. As these restrictions have been lifted, travel activity has resumed albeit at lower levels compared to levels seen before the pandemic.

Despite travel activity levels being low, the increases in travel seen in the fourth quarter have a substantial impact on the growth in the imports of services. Likewise, we observe an increase in the level of activity in air transport, particularly in the fourth quarter. Further normalization of travel activity will tend to reduce surpluses in the balance of trade in goods and services and the current account. Despite high growth in the fourth quarter’s travel activity, the levels are still low.

Total exports ended at NOK 1 723 for the year and NOK 595 billion in the fourth quarter of 2021. This is NOK 151 billion in excess of the values seen in the previous quarter and NOK 294 billion more than in the same quarter in 2020. Besides oil and natural gas exports, metals, fish and agricultural products, electricity and ships contributed to the growth in export income. Exports of services are registered at about NOK 101 billion in the fourth quarter of 2021. Increased transport exports and services related to petroleum activities count for much of the growth in export income, in addition to the increases in travel exports, as mentioned above.

Total imports in the fourth quarter of 2021 increased by NOK 43 billion measured against the previous quarter and registered at NOK 337 billion. The sharp growth was primarily driven by a rise in imports of travel, but imports of goods other than ships or goods related to petroleum activities as well as shipping costs and air transport contributed.

For more information about exports and imports, including price and volume considerations and seasonal adjustments, please see the quarterly national accounts.

Figure 1. The current account
Figure 1. The current account

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).

The balance of income and current transfers

Preliminary calculations of the balance of income and current transfers amounted to NOK 18 billion in the fourth quarter of 2021, with net reinvested earnings excluded. This is NOK 14 billion higher than the same period in 2020.

The current account balance

The current account balance ended at NOK 275 billion, excluding net reinvested earnings, which is NOK 114 billion higher than in the previous quarter. This is Norway’s highest current account balance ever for one single quarter. The recent quarters have been characterized by the fluctuating prices for crude oil and natural gas, which is illustrated by the fact that second quarter 2020 showed the lowest current account balance in history for Norway.

For the whole of 2021, Norway had a current account surplus of NOK 659 billion, representing 15.9 percent of GDP.

The financial account

2021 was a very good year for Norway’s net International investment position (IIP). At the end of 2021, Norway’s net foreign assets amounted to NOK 11 718 billion. This was an increase of nearly NOK 2000 billion from the previous year, where net foreign assets amounted to NOK 9727 billion.

Figure 2. Integrated IIP statement
Figure 2. Development in Norway's net foreign assets

The figure shows the development in Norway's net foreign assets, net lending and net other changes.

Other changes

As shown in the figure 2, the increase in Norway’s net foreign assets was mainly driven by other changes.

Except for in the third quarter, the rest of the year 2021 saw a good upswing in the global stock markets. This was positive for Norway's net foreign asset, due to the fact that a large proportion of the assets held abroad are in equity and investment fund shares. Total assets abroad were NOK 20 676 billion at the end of the year, of which equity and investment fund shares amounted to NOK 12 188, up from 10 816 billion at the end of 2020. Positive market price changes were the main contributor to this increase in positions.

Exchange rate changes had all in all, little effects on the changes in positions for the year 2021

Financial transactions

Financial transactions also increased Norway’s net foreign assets in 2021, especially in the 4th quarter, where the financial account showed net lending of NOK 238 billion, the highest ever.

During the last quarter of the year, Norwegians invested a total of NOK 410 billion abroad. The Pension Fund Global (GPFG) contributed substantially, with investment especially in debt securities. Non-financial corporations also invested in debt securities, in addition to giving loans and trade credits abroad.

At the same time, Norwegians incurred liabilities of NOK 172 billion in total.

In the process of producing the Balance of Payments current account for the fourth quarter of 2021, we have registered revisions in previous periods. The revisions lead to a higher current account surplus compared to previousely published figures.

For the first three quarters of 2021 put together, the revisions result in a strengthened current account surplus by about NOK 17 billion. For the year 2020 the current account balance is revised up by NOK 15 billion, mainly caused by revision of reinvested earnings.

The Financial account has been revised back to the 1st quarter of 2020.