While many see the weak krone as a negative which threatens to drive up inflation, it may actually have a couple of positives for Norway.
A struggling krone could spell good news for the vast majority of Norwegian companies, an expert from bank Nordea told Norwegian left-leaning publication Klassekampen.
“For the vast majority of Norwegian companies, this is very good news. At least two-thirds of listed companies in Norway will benefit from the weak krona. Very few lose from that,” investment director at Nordea Robert Næss told Klassekampen.
“But for the competitiveness of Norwegian companies, it is good that the krone is weak. And that is good news for the job markets because it will be cheaper to employ people in Norway,” Næss added.
Norway’s krone is down almost 20 percent compared to the euro, pound and dollar over the past year. There are several factors behind the weaker krone, such as lower interest rates in Norway compared to the US or Eurozone, investors taking less risk, the central bank Norges Bank selling kroner, and the krone falling with the stock market and oil prices.
Norway’s weak krone isn’t just good news for businesses in the country. The weak krone is also beneficial for those visiting Norway from a country with a currency outperforming Norway’s currency.
A weak krone means better value for money than when Norway’s currency is strong, even if the price of a product remains the same or rises less than the difference between two currencies. This makes visiting Norway cheaper, even if prices in the country have remained high.
Not all good news
A weak krone isn’t good news for everyone, though. While a weak kroner may boost Norwegian businesses, that doesn’t translate directly into money in the pockets of Norwegian consumers.
Furthermore, a weak kroner can also contribute to increased inflation, which is felt by consumers.
Weak currency contributes to higher inflation, making the cost of imported goods even more expensive.
“There is a difference between shaving and cutting off your chin. Now there is a legitimate fear that the weak krone exchange rate contributes to the inflation that we are trying to bring down, staying up. The effect of that will be a lot of noise in the salary settlement and a lack of real salary development for most people,” Director Knut E. Sunde for the industry and industrial policy department in the NHO association Norsk Industri told Klassekampen.
Source : TheLocal
