2020 Index of Economic Freedom

Norway

OVERALL SCORE73.4
WORLD RANK28
Rule of Law

Property Rights84.3

Judicial Effectiveness82.8

Government Integrity95.6

Government Size

Tax Burden57.7

Government Spending25.6

Fiscal Health97.3

Regulatory Efficiency

Business Freedom86.1

Labor Freedom57.4

Monetary Freedom74.8

Open Markets

Trade Freedom83.8

Investment Freedom75.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 5.3 million
  • GDP (PPP):
    • $395.9 billion
    • 1.4% growth
    • 1.7% 5-year compound annual growth
    • $74,356 per capita
  • Unemployment:
    • 3.9%
  • Inflation (CPI):
    • 2.8%
  • FDI Inflow:
    • $-18214.7 million

Norway’s economic freedom score is 73.4, making its economy the 28th freest in the 2020 Index. Its overall score has increased by 0.4 point due to a higher labor freedom score. Norway is ranked 15th among 45 countries in the Europe region, and its overall score is well above the regional and world averages.

The Norwegian economy has been rated mostly free for eight years. GDP growth, however, has poked along at less than 2 percent annually for the past five years.

The greatest impediment to greater economic freedom in Norway is too much government spending. Reducing it will be difficult, however, because a large part of the economy and an even larger percentage of the government’s budget are structured around revenue from Equinor, the state-owned oil, gas, and wind-energy company. It would be easier for the government to reform another lagging Index indicator, labor freedom, to make the labor market more competitive.

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Background

Norway abandoned its traditional neutrality and became a charter member of NATO in 1949 and joined the European Free Trade Association. Conservative Prime Minister Erna Solberg was narrowly reelected in 2017. She heads a center-right coalition government that, with the addition of the Christian Democrats in January 2019, became the first non-socialist majority coalition since 1985. Norway is one of the world’s most prosperous countries, and oil and gas production account for 20 percent of its economy. Other important sectors include hydropower, fish, forests, and minerals. State revenues from petroleum are deposited in the world’s largest sovereign wealth fund. Unemployment is low, but an aging population could prove challenging in the future.

Rule of LawView Methodology

Property Rights 84.3 Create a Graph using this measurement

Judicial Effectiveness 82.8 Create a Graph using this measurement

Government Integrity 95.6 Create a Graph using this measurement

Secured interests in property, both movable and real, are recognized. The system for recording interests in property is recognized and reliable. The judiciary is independent, and the court system operates fairly. Business is generally conducted “above the table,” and Norway ranks 7th out of 180 countries on Transparency International’s 2018 Corruption Perceptions Index. Corrupt activity by government officials is a criminal offense.

Government SizeView Methodology

The top personal income tax rate is 47.8 percent, and the corporate tax rate is 22 percent. Other taxes include value-added and environmental taxes. The overall tax burden equals 38.2 percent of total domestic income. Government spending has amounted to 49.8 percent of the country’s output (GDP) over the past three years, and budget surpluses have averaged 5.5 percent of GDP. Public debt is equivalent to 36.8 percent of GDP.

Regulatory EfficiencyView Methodology

A fair legal system, transparent regulations, and political stability make Norway a secure and transparent place in which to do business, but long-term demographic shifts threaten the business environment. Labor costs are high. Labor market regulation was recently amended to allow more work at night. Monetary stability has been well maintained, but tax incentives and subsidies to encourage home ownership have added to high and rising house prices.

Open MarketsView Methodology

The total value of exports and imports of goods and services equals 70.6 percent of GDP. The average applied tariff rate is 3.1 percent, and 236 nontariff measures are in force. The investment code is efficiently administered. A new law that introduced control of acquisitions based on national security considerations was adopted in June 2018. The modern financial sector is competitive, although the state retains ownership in the sector.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Switzerland820.1
2Ireland80.90.4
3United Kingdom79.30.4
4Denmark78.31.6
5Estonia77.71.1
6Georgia77.11.2
7Iceland77.10.0
8Netherlands770.2
9Lithuania76.72.5
10Luxembourg75.8-0.1
11Finland75.70.8
12Sweden74.9-0.3
13Czech Republic74.81.1
14Germany73.50.0
15Norway73.40.4
16Austria73.31.3
17Latvia71.91.5
18Armenia70.62.9
19Bulgaria70.21.2
20Cyprus70.12.0
21Romania69.71.1
22North Macedonia69.5-1.6
23Malta69.50.9
24Azerbaijan69.33.9
25Poland69.11.3
26Belgium68.91.6
27Slovenia67.82.3
28Kosovo67.40.4
29Portugal671.7
30Albania66.90.4
31Spain66.91.2
32Slovakia66.81.8
33Hungary 66.41.4
34France662.2
35Serbia 662.1
36Turkey64.4-0.2
37Italy63.81.6
38Bosnia and Herzegovina62.60.7
39Croatia62.20.8
40Moldova622.9
41Belarus61.73.8
42Montenegro61.51.0
43Russia612.1
44Greece59.92.2
45Ukraine54.92.6
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