The Risks of Rising Household Debt in Norway

The Norwegian economy scores well above most other developed countries in measures of quality of life and governance. It is considered to be one of the best countries to live in, with a high level of life quality, low inequality and a sound welfare state. High oil exports are taxed by the government at a marginal rate of 78 percent and the money is invested in the Government Pension Fund Global, which at the end of 2016 had holdings with a total value of NOK 7 510 billion, corresponding to $170.000 per capita.

Does this high level of financial security guarantee the financial stability of the Norwegian household sector? There are signs that such positive expectations for the future have led to increased risk taking by banks and households. Norway´s household debt/income ratio is currently at 235 percent, which is an increase from 125 percent in 1996. Today Norway´s debt-to-income ratio is the third highest among OECD countries.