The sudden decline in the value of Norway’s currency, lower oil prices and a rise in bankruptcies were all prompting another round of warnings from economists and politicians this week, but few see any new signs of crisis. There is cause, they say, for caution.
“As a Norwegian, I fear the situation in China more than the debt crisis in Europe,” Pål Ringholm, analyst at Swedbank, told newspaper Dagens Næringsliv (DN). The Oslo Stock Exchange fell sharply at the start of the week, as did others around the world, with analysts linking the fall to uncertainty over the health and stability of credit markets in China.
Oil demand uncertain
“China has had an enormous growth in credit and there are clear bubble tendencies in its economy,” Ringholm said. “If the bubble pops, consumer demand will fall and demand for oil will fall.” Norway’s oil-fueled economy is thus vulnerable, not least since economic growth in China has fueled much of the world’s economic growth in recent years. “Norway’s comfortable situation could quickly change,” Ringholm said, given high Chinese debt levels and credit uncertainty. That’s already been blamed for a fall in oil prices, but on Tuesday they were back up again, at just over USD 101 for a barrel of North Sea crude.
Currency decline and more bankruptcies
Meanwhile, Norway’s strong currency of recent years fell in line with Oslo’s stock exchange, after already falling last week when the Norwegian central bank said interest rates would remain low and may decline sooner than expected. It now takes more than NOK 6.10 to buy a dollar, compared to NOK 5.80 just a week ago. That’s making summer holidays more expensive for Norwegians but the weaker krone is welcomed by Norwegian exporters. It makes their products more competitive. There has been concern in Norway over a rise in bankruptcies, with more retail establishments filing for protection from creditors. In May, a total of 457 Norwegian companies were declared bankrupt, a 60 percent increase since the number of bankruptcies in Norway bottomed out in April of last year. The bankruptcies are spread over several branches, with small construction, transport and retailing accounting for the most. Employers’ organization Virke, which represents many retailers in Norway, announced a 50 percent increase so far this year among its shop-owner members going bankrupt.
Brisk card use Business is “slowing down,” said Virke managing director Vibeke Hammer Madsen. “Rrising unemployment and increased uncertainty are making Norwegians hold a bit tighter onto their wallets.” Others, however, point to increased competition from online retailers, especially in the clothing business. Several clothing stores have gone out of business lately in Norway after losing customers to so-called “Internet stores” that are cheaper and deliver to the door. Norwegians are certainly continuing to spend lots of money when traveling outside of Norway. New figures from Norway’s central bank show record bank card use abroad, up 17.5 percent to NOK 102.3 billion last year. As record numbers of Norwegian charter tour customers set off on summer holidays last weekend, analysts expect a new credit- and debit-card record will be set by traveling Norwegians this year as well.
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