‘Weakest krone’ since 2009

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The value of Norway’s currency has suddenly fallen to its weakest level since 2009, making the country’s notoriously high prices slightly less startling for tourists and overseas buyers of Norwegian exports. Economists aren’t quite sure why the krone has fallen so much just in the past week, but many are welcoming the decline.

Norway's currency, the "krone" (crown), remains strong against other currencies. To avoid confusion: The plural from of the krone is "kroner" in Norwegian, or "crowns," but many foreigners also use the Norwegian term.  PHOTO: Views and News

Norway’s currency, the “krone” (crown), has been so strong for so long that many are welcoming a decline in its value. PHOTO: newsinenglish.no

As of Wednesday morning, it cost around NOK 8.30 to buy one euro and NOK 6.20 to buy one US dollar. That’s quite a bit more than earlier this year or even earlier this month, with the latest slide beginning late last week.

Economists note, however, that it’s difficult to pin down specific reasons for the drop. There’s been no sudden fall in oil prices (an important factor in Norway’s oil-fueled economy), there’s been no dramatic change in interest rates, no sudden shocks in the Norwegian economy or any global news that would make growth prospects uncertain.

“There haven’t been any of ‘the usual suspects’ contributing to this,” Harald Magnus Andreassen, chief economist at Swedbank First Securities, told newspaper Dagens Næringsliv (DN) on Wednesday.

(Scroll down to our constantly updated currency exchange charts in the right-hand column, to track recent fluctuations.)

Norway’s new conservative coalition government presented its first new state budget on Friday, and it contained several changes from the previous left-center government’s budget, but it didn’t tap into anywhere near the extra billions of kroner in oil revenues it could have. Conservative governments, moreover, usually boost economic confidence even though in Norway there were prospects they’d be more free-spending than their socialist predecessors.

Erna Solberg at Nordisk Råd (statsministermøte). PHOTO: Statsministerens kontor

Prime Minister Erna Solberg, shown here at a recent Nordic Council ministerial meeting, made a statement last week that may have unintentionally set off the slide in the value of the kroner, according to one economist. PHOTO: Statsministerens kontor

Andreassen suggested, though, that a statement by new Prime Minister Erna Solberg may have unwittingly contributed to the fall in the strength of the krone. “She said that (her government’s) financial policies will take into consideration just how strong the krone is now,” Andreassen told DN, “but that’s not what she meant. She meant to say that the government will take exchange rates and competitiveness into consideration when policies are formed.”

Andreassen doesn’t think Solberg was sending any signal that the value of the krone, which has been at record strong levels for years because of Norway’s robust economy, should decline. Traders may have interpreted her statement as such, though, prompting them to sell kroner while still strong.

While no one can say how long the krone will stay at its current, weaker level, the decline was warmly welcomed in the tourism industry and among Norwegian exporters. It will make them much more competitive and can ease the problem of high costs and high prices in the Norwegian economy.

“We’ve seen some tendencies towards a weaker krone since the spring,” currency trader Svein Haga told DN. “The krone has been much, much too strong for traditional Norwegian business. Norway has the worst salary cost levels and costs in general are out of line with international levels.” Haga thinks a weaker krone will be  “a huge advantage” for the Norwegian economy, and “the easiest way out” of the competitiveness trouble the country has been in.

Hotel owner Edmund Harris Utne in the popular and scenic mountain area of Hardanger was delighted by the fall in the krone, because it will make everything from hotel room rates to restaurant meals somewhat easier to swallow for foreign visitors. A double-room costing NOK 1500 per night is now suddenly 10 percent cheaper when converted into US dollars than it was last year. The euro and the Danish krone have also strengthened significantly against the Norwegian kroner, and those are currencies used by the majority of visitors to Norway.

More Norwegian tourists may also opt to spend holidays at home, since they’ll now face higher prices abroad. “This can mean growth of 7-8 percent in our most important European markets,” Utne told DN. “I nearly said 10 percent, but should be a bit more sober.”

newsinenglish.no/Nina Berglund