Norway Sees Record Flight of Foreign Investors Amid Fears of Political Risks

The unprecedented sale of Norwegian shares by foreigners has been attributed to a weak national currency, economic instability and an erratic tax policy that unnerves investors.

In late 2022, Norway saw its first-ever flight of foreign capital, a problem that has drawn increasing attention and even alarmed the leader of the Nordic country's largest opposition party.

In the third and forth quarters of 2022, Statistics Norway reported a net sale of nearly NOK 26 billion ($2.5 billion) worth of Norwegian shares. The national number-cruncher has been compiling these statistics since 2012 and has never before seen such a shotgun sale.

This coincided with new taxes on salmon and wind power announced by the government at the end of the third quarter, a problem addressed by the Conservative Party who blamed the government's unpredictable tax policy and called the recent hikes as well as the government's failure to explain then in plain language "completely unacceptable."

Conservative politician Jon Gunnar Pedersen, former state secretary at the Finance Ministry, ventured that foreign investors are apprehensive of political risks for the first time since the 1990s and said he was surprised that their reaction would be that strong. Pedersen stressed that building investors' trust and soothing their concerns takes time and warned against creating further political unrest over the country's tax system.

"Now there is political risk again for foreigners who are going to invest in Norway," Pedersen told local media.

He also mused that it may bode ill for the national currency, which has already become a reality in neighboring Sweden.

"We see today that the only thing foreigners mostly need Norwegian kroner for is to pay oil taxes. They do not need kroner to invest in Norwegian companies. It will over time weaken the krone if it continues," Pedersen said.

The Norwegian krone has already weakened the most of the G10 currencies over the past year.

Conservative Party leader and former Prime Minister Erna Solberg used her recent national assembly speech to call on her party mates to regain the trust of foreign investors.

"Although we have had very high oil prices for a period, the krone has not followed it. It is unusual, because usually the krone exchange rate has followed the oil price," Solberg said. "There may be instability around the Norwegian economy."

The Labor-led government countered that foreigners' ownership of Norwegian shares has remained stable.

Oil-rich Norway has one of the world’s highest tax burdens alongside its Scandinavian peers, and is among the few in Europe to have introduced a specific wealth tax, which is calculated based on one’s total net wealth and includes all of one's possessions. The recent hikes by the left-wing government led by Labor have already prompted a flight of billionaires from Norway, spurring accusations of "breaking the social contract" from Prime Minister Jonas Gahr Store.