For years, Norwegian exporters complained that Norway’s currency, the krone, was much too strong. The value of the krone has since weakened considerably, falling in recent weeks along with oil prices, but now importers are complaining because everything has become more expensive.
On Thursday it took nearly seven kroner to buy one US dollar, up from just over five kroner as late as last year. The krone has also weakened against the euro, the British pound and many other currencies, with newspaper Dagens Næringsliv (DN) reporting Thursday that it’s now at its lowest level for more than five years, in relation to Norway’s most important trading partners.
The weaker krone may lead to even higher consumer prices in Norway. Øystein Dørum, chief economist at DNB Markets, holds the weaker kroner accountable for a large portion of the recent annual rise in prices, from 1.5 percent last year to 2.5 percent this year.
No fun for toy store retailer
Retailers like high-quality toy store Sprell in Oslo are feeling the pinch as they import merchandise in time for the Christmas sales season. “Just since September, the value of the euro has risen (against the krone) from NOK 8.17 to NOK 8.61,” Alexander Arnesen, who owns the toy store with his wife Hege Alnæs Arnesen, told DN. “That represents an increase of 5 percent. For us, it’s a crisis when the euro is so high just a few weeks before Christmas.”
It means Sprell’s costs are higher and it can make their merchandise more expensive than it otherwise would be if they pass the higher costs on to customers in order to meet budget. The last time the krone weakened, during the finance crisis of 2008, “our entire profit went up in currency exchange rate smoke,” Arnesen said.
It’s no fun and games for the toy retailer, nor for other importers who need to remain competitive. Bjørn Næss of retail employers’ association NHO Handel calls the sudden drop in the value of the Norwegian krone “dramatic” not least because it’s arrived just as retailers are stocking up for the holidays, their busiest and most important sales season of the year.
“Our retail members do most of their purchasing abroad, and this is a dramatic development,” Næss told DN. “At some point it must lead to higher prices for consumers, but strong competition makes raising prices difficult for many.”
Food prices are also likely to rise, since half of Norwegians’ food is imported despite the country’s famously high protective tariffs. Vibeke Hammer Madsen of Norway’s other employers’ association Virke stresses, though, that currency exchange rates have always gone up and down.
Many of Norway’s automobile importers have also protected themselves against dramatic swings in currency exchange rates, cutting deals with car producers to buy in kroner or arranging currency exchange deal with their banks.