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Norway’s high household debt shaking economy

The debts of Norwegian households have grown faster than their income during the last few years, making the Norwegian economy vulnerable, said a report on Tuesday.

Published: 4 November 2014 11:45 CET

Norway's high household debt shaking economy

Debt is on the rise among Norwegian householders. Photo: Shutterstock

The Financial Supervisory Authority presented the report “Finansielle utviklingstrekk 2014” (“Financial features of development 2014”) this week.

The report warns people that several kinds of shockwaves could hit the Norwegian economy and the country's finance institutions in the near future. High household debts and rising houses prices are especially factors related to a more vulnerable economy.

Finance Authority director, Morten Baltzersen, said to NTB: “What will happen ahead is uncertain.”

The Financial Supervisory Authority pointed out that most debts on mortgage in Norway have an adjustable interest rate. This means that an increase of the mortgage interest rate will quickly reduce the available income of households. Many households have more than twice their income in debt, and the same households have limited economical buffers.

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How do food prices in Norway compare to the rest of Europe?

Famously known for being on the pricey side, Norway has many factors that draw foreign residents, such as the scenery, wages and work-life balance.

However, one common complaint is the high prices. Is the cost of food and groceries as bad as everyone says?

Unfortunately, according to the statistics, Norway lives up to its reputation for expensive food and groceries.

Eurostat, which monitors price levels across the EU, EEA and EU candidate countries, has ranked Norway as the country with the second highest price level index for food and non-alcoholic beverages.

Out of the countries monitored by the stats agency, only Switzerland had a higher price level index. A price level index measures the price levels of a given nation relative to other countries. This means that compared to the rest of the other countries measured, food and non-alcoholic beverages in Norway are the second most expensive overall.

According to Eurostat’s data and price level index, prices in Norway were 49 percent higher than the EU average in 2021. Norway also had the highest price for fruits, vegetables, potatoes, and ‘other food’ products. ‘Other foods’ consist of chocolates, sugars, jams etc.

READ ALSO: Why food in Norway is so expensive

In addition, non-alcoholic beverages in Norway were also the most expensive found among 36 European countries. The price of alcoholic drinks in Norway lived up to their reputation for priciness, with the cost of alcoholic beverages being 160 percent higher than the average and the second most expensive after Iceland.

Scandinavia as a whole has a reputation for high prices, so how did Norway compare in this regard?

Finland had the lowest overall food prices out of Scandinavian countries when measured by the price level index for food and non-alcoholic beverages. This was followed by Sweden, which had a score of 117, Denmark with 120 and Iceland with 139.

This highlights that even among the Nordics, Norway is an expensive country for food.

One noticeable trend is that the food prices in Norway are becoming less expensive compared to the European average. In 2018, food prices in Norway were 63 percent higher than the European average. Three years on, this had fallen to 49 percent.

Even though the prices are high, is it really that expensive when considering wages?

While food is certainly more expensive in Norway than in most countries, wages are also considerably higher.

For example, the average monthly salary in Norway was 50,790 kroner per month in 2021. This equates to just over 5,000 euros. In 2022, the estimated monthly average wage in the EU was around 2,570 euros. However, it’s worth pointing out that large differences exist between EU countries. For example, the average monthly wage in Bulgaria was estimated to be around 852 euros, while in Denmark, it’s estimated to be about 5,979 euros (44,514 Danish kroner).

Therefore, a more accurate way of measuring the true cost of food would be to measure how much of a household’s monthly income is spent on food.

In Romania, food made up more than a quarter of household expenditure, making food more expensive there for households as it eats up a larger chunk of consumers’ budgets, despite lower prices than the EU average. Across 36 countries measured by Eurostat, food and non-alcoholic beverages made up around 13 percent of total consumption expenditure by households.

In this regard, Norwegians actually spend less money on food than other European households. Food and non-alcoholic beverages accounted for 11.3 percent of households’ total spending in 2022, according to Statistics Norway.

Typically, someone aged 31-50 years will spend between 3,100 – 3,660 kroner per month on food, according to the Consumption Research Norway’s (SIFO) Reference Budget for Consumer Expenditures.

So even while Norway spends more money on food, it’s less expensive overall as it takes up a lower portion of household expenditure. fra

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