July 3 (UPI) -- Norway needs to make economic preparations to address long-term risks, but has shown strength in the face of lower oil prices, ratings agency Moody's said.
"Lower oil prices have contributed to slower but still positive growth in Norway," Kristin Lindow, a Moody's senior vice president and co-author of a report from the agency, said in a statement.
In an annual update, Moody's said real gross domestic product for Norway will increase from 1.5 percent to 2 percent next year on the back of better investments and stronger export trends. Apart from Russia, Norway is the largest oil and natural gas exporter to the European economy, sending nearly all of its offshore production to members of the European Union.
Last week, Fitch Ratings gave Russia a BBB- rating after the country's central bank cut interest rates again. Russian GDP growth is expected at 1.6 percent, up from 1.4 percent, though the nation's economy is only recently recovering from a recession sparked by the dual strains of Western sanctions and lower crude oil prices.
Crude oil prices are relatively stable year-over-year, but are about half what they were three years ago.
According to Moody's framework for assessment, Norway has the highest possible institutional strength, at AAA.
"Moody's also ranks Norway's fiscal strength as 'very high (+)', because the government's balance sheet is extremely strong even compared with other AAA-rated sovereigns, with substantial net assets instead of net liabilities," the ratings agency explained.
In March, Norge Bank, the country's central bank, left its key rate unchanged at 0.5 percent. In a statement of justification, the bank said inflation would be lower than it expected, which implies the Norwegian economy is becoming isolated. On the positive side, there are prospects inflation will pick up and "the upturn in the real economy appears to have taken hold, and unemployment has declined."
The bank found lingering economic strains from energy market factors, though bank Gov. Øystein Olsen said a worst-case scenario never materialized for Norway. For oil and gas production, Olsen said the peak was passed more than a decade ago, though he noted the sector as a whole may have been underestimated.
Among the risks, Moody's said an aging demographic will be a challenge for Norwegian economic planners, as will the potential fallout for European trade levels without the United Kingdom.