The Norwegian krone has been on a long-run weak trend since the sharp drop in oil prices in 2014. From the late 1980s to 2014, the NOK/EUR exchange rate tended to converge at NOK 8 per EUR. Currently the exchange rate is 50% higher, approaching 12 NOK per EUR. Lately, despite a high oil price, the krone has remained weak, indicating that there are other drivers behind the NOK’s weakness. Early COVID-19 uncertainty caused the krone’s value to tumble, as investors turned to safe-haven currencies like the dollar. Then the steep global hiking cycle, necessitated by rising inflation after the pandemic, compressed Norges Bank’s policy rate differential with its trading partners, weakening the NOK further. When the Fed cut its policy rate in September, the NOK slightly appreciated, but it is now depreciating again. Additionally, a decline in Norway’s oil exports relative to total exports, and a shift from oil to renewable energy, are pulling the value of the NOK down. Another impact of oil revenue on the value of the NOK is Norges Bank converting tax revenues from oil companies to USD for Norway’s sovereign wealth fund, which is invested abroad. All else equal, this causes a depreciation of the NOK. A weak NOK decreases the likelihood of an interest rate cut in Norway this year, particularly because this causes imported inflation.
by alitbsh
19 comments
Partly an ongoing correction from 10 years ago where the Krone was seen as a safe oil backed haven.
Easy: bad fiscal policies and unwillingness to change things. The further issue in Norway is that the oil companies are simultaneously gouging consumers, well beyond the devaluation, further increasing pressures on the average Norwegian. Sweden has done similar with their economy and SEK, but the economy seems to be in a better place and without the price gouging for energy.
The short boring answer is that we do not know.
The slightly longer answer is that preliminary research suggests that weakened productivity spillovers from the petroleum sector to the mainland economy has slowed down since 2013-2014.
This article might be useful if you run it through a translator: [https://www.ssb.no/nasjonalregnskap-og-konjunkturer/konjunkturer/artikler/hva-pavirker-kronekursen](https://www.ssb.no/nasjonalregnskap-og-konjunkturer/konjunkturer/artikler/hva-pavirker-kronekursen)
Country is run into the ground by bad leaders that expect sitting on their hands while showering in oil and gas is enough. Meanwhile everyone not in oil and gas is either hired by government or put on welfare. The economical future of Norway is poor. There’s literally nothing to be excited about. That’s why people don’t invest, they don’t want krone.
More and more of the economy is going towards non-productive jobs or spend, mostly public spending which increase massively. Taxes have been changing often and been increased often without warning or debate. Country is seen as unfit from external investors. High net worth individuals are voting with their feet causing massive selling preassure and loss of tax revenue.
I think these are the reasons
Part of the reason may be that we have a bloated public sector size which impairs productivity rates. We are currently at the top, and we know that 3/4 of the generated wealth comes from the private sector.
If we would reduce to slightly above OECD average we would benefit massively from that. We have increased public spending with 50% over the last 10 years. According to many economists, this is directly degrading our national productivity rates.
But with politicians who benefit from this its hard to take action.
A mix between the variability of oil and gas prices and the price variability of aluminum and Norwegian tax policy
Can’t recall where I read it but as far as I can remember there are many whom actually benefit from having a weak Krone.
Take this with a with a grain of salt as I can’t find the source:
* It becomes cheaper for foreign investors to buy assets, properties and stocks in Norway.
* It becomes cheaper for foreign companies to buy goods and services from Norway.
* Norwegian oil and gas companies sell their goods in USD/Euro, but their employee salaries and taxes are paid in NOK. A weaker Krone means reduced expenses.
So besides the norwegian people and Norwegian companies that sell their goods to its residents, a weak Krone benefits everyone, unfortunately.
Take Jotun (chemical / paint manufacturer) or Komplett ( electronics retailer) for example.
Even with increased sales and income, their profit margins gets smaller due to increased prices on foreign goods, but especially the weaker currency.
So lets try to answer the **why**.
**Warning: Tinfoil hat on**
There are numerous wealthy organizations and people that benefits greatly from the weaker Krone.
Profit gains from exporting oil, gas, fish, energy, weapons, machines and timber increases with a weaker Krone.
Considering the policies that have been put into place since 2008 I have no doubts that our politicians are actively (knowingly or not) selling out our country. I wont point a finger at any parties, as I’m convinced that the majority of our politicians have little to no clue of the consequences of their policies, considering how many advisors and lobbyists they rely on.
I’m far from a financial expert and I’m also missing my main source for these claims.
If anyone knows which source i’m thinking of, please provide it.
And as always: In the event that I’m partially or completely off, I’m fully welcoming any facts that counter my claims. Cheers!
Because we have a shit goverment that is doing everything possible to scare investors away. Even regular norwegians are investing outside of Norway now.
[nobody knows](https://www.economist.com/finance-and-economics/2024/09/12/norways-weak-currency-presents-a-mysteryfromTheEconomist) many people speculate wildly. Most in this thread immediately assume it’s a Norway politics thing and throw out their bug-bears. This could be the case, could also be that a tiny country with a tiny currency is not always the master of all macroeconomic impacts.
Hasn’t been strength training
Because Ap wants it weak and try to go join EU again, switching to EUR.
A couple of factors:
1) Lack of direct foreign investment – companies find it more profitable to be in low tax jurisdictions like the US, Ireland, Singapore.
When DFI happens, the company would have to convert their local currency to NOK, which drives demand for the Krone up and also the price
2) Lack of innovation – Norwegian economy is 1/3 public sector (net drain on an economy), and the lions share of the remaining economy is oil/fishing. The only real innovative company in Norway of a decent size is Kongsberg – but their main customer is – surprise surprise – the Norwegian government.
3) The public sector has received subsidies via the Sovereign fund, where 37 billion USD go to keep people at all level of government employed. They receive 5-6% raises each year, which put upward pressure on prices and reduces the unemployment rate, which also causes inflation relative to other economies that have a free market on labor. (for example – Norway and Sweden have similar government spending Norway with 225mUSD vs Sweden’s 287mUSD), even though Sweden has 2x the population
4) Unproductivity – working at a large oil company in Norway, I see how little some of my colleagues do at work. I am speculating, but the workers protections in Norway may give employees a more relaxed work ethic as they are not worried about losing their job.
This is just a preliminary overview – I am sure there are other factors, but when we forecast exchange rates we point to these factors as being major influences to a persistently weak NOK.
TLDR: Norway needs to lower taxes, cut unnecessary inflationary government spending, and make businesses more competitive.
Due to an unbelievable inept fiscal policy, run by morons that are either incredibly incompetent or incredibly evil. The country has the world’s biggest public sector and the highest taxes in the world. In addition all the entrepreneurs that finance this madness are leaving the country, because they would have to liquidate their assets to pay taxes. Furthermore the central bank is instructed to sell off up to 2 billion NOK daily that nobody wants, causing an even steeper decline.
Why do this question keep popping up? It is happening because of speculators, and their logic is about controling small currencies, so only they get their free money, while everyone else are miserably trying to second-guess the nonexisting logic here
Norway has a quite weak private sector. No businesses to really invest in. Our free labor force is small, and the conditions for starting and running a business aren’t great. This is just my gut feeling though
It seems like for every expert there are two opinions. I’m no macro economy expert so I don’t know.
My understanding of it seems to correlate with what a few billionaires have been saying, which is that generally foreign investors have lost belief in the Norwegian economy. This makes the Krone a less than safe investment opportunity.
The current government seems more preoccupied with “punishing” the wealthy rather than focusing on building new wealth or new industries. I’m not rich or I wouldn’t waste time on here, but my understanding is that the government’s policies contribute both to driving capital out of the country and at the same time making it less appealing than before for foreign capital to invest within the country. This works to put question marks over the health of the economy long term and so drives a reduced willingness to buy the Norwegian Krone.
Investors want a safe environment when investing, so when Norway decides to move away from fossil fuels but with no viable alternative, it produces uncertainty. What will we make our money from in the coming decades? Dividends from our Pension Fund? Fish? There seems to be no answer to what exactly will replace the income from oil and gas. Without oil and gas we will have to make dramatic cuts to our national budget. This all makes for an uncertain future. And an uncertain future is not conducive to foreign investment.
As someone coming for a hiking trip this summer, I like.