The value of the Norwegian currency, the krone, was down again on Tuesday, with one US dollar costing NOK 7.73 by midday. Consumers have been warned of a “price shock” on imported goods, not least at the state liquor monopoly Vinmonopolet, but analysts think the krone will rise again by mid-year after an extremely turbulent few months.
“We expect that the krone will strengthen,” Thina Saltvedt, analyst for Nordea in Oslo, told Norwegian Broadcasting (NRK). She said the Nordic bank simply expects that overall confidence in the Norwegian economy will improve.
The krone fell along with another decline in oil prices. A barrel of North Sea crude was trading below USD 54 as the week began and Saltvedt argued that the resulting decline in the krone indicates panic in the market.
Magne Østnor, currency analyst at DNB Markets in Oslo, also believes the Norwegian krone will regain strength during the course of the year. “Faith in the weakness that we saw last fall, especially in the last few months, has been exaggerated,” Østnor told NRK. “The oil price was the trigger, and lower oil prices of course mean that growth of the Norwegian economy will be lower, which means we will have a weaker krone, but not as weak as we see now.”
While some are earning well on the weaker krone, Norwegian consumers face higher prices on all imported goods and, not least, higher costs when they travel abroad. Some stores are already marking up their wares, with prices rising on some big-ticket goods like stereo equipment, electronics and household appliances. At the state-run liquor monopoly, Vinmonopolet, the prices on some wines have already jumped. A bottle of Dezat Sancerre from France, for example, was priced at just over NOK 200 a bottle over the weekend, up from NOK 181 last summer and around NOK 190 last fall.
Newspaper Aftenposten reported just before New Year that customers should brace for some “price shocks” at Vinmonopolet from May 1, when new prices from importers will take effect. Only “small changes” have been made so far, but wine and liquor prices may jump around 10 percent or more, predicted one importer. It all depends on developments in the exchange rate between the krone and the euro, which is the currency used in most wine imports, for example.
Holiday tour operators have also been worrying about higher prices during the summer travel season, but Saltvedt of Nordea thinks the krone will have regained strength by then. “It can be more reasonable than we thought to travel abroad, and also that price increases outside Norway may be less than we feared last fall,” she told NRK.