– There is no person who goes to work in New York or Frankfurt and says that now I want to buy kroner, says Spetalen. In the last ten years, the krone has lost value against most currencies. The exchange rate tells what the country’s money costs, measured against another country’s money. It tends to reflect how things really are in an economy. US dollars have gone from costing NOK 5-6 in 2013 to NOK 10-11 today, while euros cost NOK 7-8 and are currently NOK 11-12. The krone has weakened against most currencies, with the exception of some special currencies such as the Nigerian naira or the Argentine peso. This should frighten the politicians, Spetalen believes. Because it is not the central bank, which is supposed to keep the monetary value in check, that has given less confidence in the krone, according to him: – More of Norway will be the public sector. Everything from business is being throttled. In addition, we see that many foreign investors are fleeing the Norwegian capital market, says Spetalen. Policy rate in percent The policy rate is set eight times a year by Norges Bank. The policy interest rate governs the interest rates in the banks, and affects your housing costs. The aim of raising the interest rate is for the high prices to come down again. The forecast tells us how Norges Bank thinks interest rates will develop in the future. Read more about sources and reservations here. A higher policy rate means increased expenses if you have a mortgage Points to the employment crisis as serious for Norway Spetalen believes that foreign countries see Norway as politically unstable. At the general election in 2021, the smaller parties on the wings historically received many representatives. For the first time, the Conservative Party and the Labor Party, which have traditionally been regarded as governing parties, made up less than half of the Storting. – They have stood for political stability in society. When you get factional parties that want to achieve special advantages with far-reaching proposals, uncertainty is created. What is happening to the Labor Party now, I think, is harmful for Norway in the long term, he says, and continues: – Buying currency is buying future earnings in a country. You buy economic and political stability in a country. In Norway, there are discussions about closing the oil business, and the long-term outlook for Norway is becoming dangerous. Other problems are also in the queue, according to Spetalen: Electricity prices have skyrocketed, the government has increased both wealth tax and dividend tax. The krone weaker after tax shock The krone example for Spetalen is 28 September last year. Then the government shocked by announcing a special tax for farming and wind power. – On the day the salmon tax was introduced, the krone fell 2-3 per cent, says Spetalen. TAX SHOCK: Finance Minister Trygve Slagsvold Vedum (Sp) and Jonas Gahr Støre (Ap) took the market by surprise by presenting a new special tax of 40 per cent for the salmon industry half a year ago. Photo: Terje Bendiksby / NTB Dane Cekov is a senior economist at Nordea. He says Spetalen is right that the krone exchange rate weakened in the following days. – It could be that what the authorities came up with then has meant that foreign investors have thought that they do not want to sit on the shares. In that process, they have sold shares and kroner. It is something that cannot be ruled out, he says to news. In the past year alone, the krone exchange rate has lost around 15 per cent of its value. Cekov believes that there is a weakness in Spetalen’s reasoning, and that is that the analysis overlooks the fact that the Swedish krona has also become weaker. The Swedish politicians have not come up with a tax shock. But they have in common that they are small currencies. – Both the Norwegian and the Swedish krone are risk-sensitive currencies. We know that in the last year there has been a lot of turbulent development in the stock market. That uncertainty has been with us for the past couple of years, and it has meant that foreign investors have invested less in kroner, he says. Senior economist Dane Cekov at Nordea. Cekov believes that political uncertainty is not the main explanation, but may have something to say in the big picture. – There is an explanation with political uncertainty, but Swedish kroner has weakened accordingly in the last couple of years. I’m not saying it’s not true, but currency is extremely difficult to analyze because there are many factors that affect exchange rates, says Cekov. Four reasons why the krone has become weaker Senior economist Dane Cekov at Nordea points to four reasons why the krone is considerably weaker today than in 2010. The interest rate differential with foreign countries is decreasing: Norway no longer has higher interest rates than the eurozone and the USA. Japan and Switzerland are also in the same situation as Norway, but have larger currencies, are considered safe havens and are thus less exposed to fluctuations. Thus, the Norwegian krone is chosen away. Investors take less currency risk: Financial institutions such as banks and funds were subject to regulations after the financial crisis that make it more difficult to invest in risky assets. It can typically be smaller currencies, such as Norwegian kroner. Certain hedge funds have completely stopped owning kroner, according to Cekov. Krone sales when the stock market falls: The krone is weakened when the financial markets fall. Norwegian life and pension funds such as index funds must reflect the value of the stock exchanges they are measured against abroad. These investments must be currency hedged. This means that krone must be bought if the indices rise, while krone must be sold if the stock market falls. Norges Bank sells kroner: The krone exchange rate fluctuates with the price of oil and gas, which is Norway’s most important commodity sold abroad. But even though Norway has an enormous trade surplus with other countries, the basic balance does not show a surplus because the central bank sells so many kroner that the effect is almost neutralized. Norges Bank sells NOK 1.7 billion every day. Thinks the flight to Switzerland contributes to the flight of krone Spetalen believes the political uncertainty and electricity prices will cause industry to disappear from Norway, while the country is left with a large oil and gas business. – There is a reason why they are called industrialized countries and developing countries. If we base ourselves only on oil, we will become a developing country, he says. In Spetalen’s book, on the other hand, Switzerland is a country with political stability and predictable tax conditions. When British and American newspapers write about Norway’s own financial leaders escaping to Switzerland, that is not exactly a buy signal for the krone, Spetalen believes. – It sends an unfortunate signal abroad, he says, and continues: – It is unnecessary to chase the people out. It is short-term happiness. It is not good for Norway and those who want to invest money, technology and ideas. – Do you think there are large dark figures compared to the people we see in the media? – I think it is a lot. A lot! I hear there are many now. Very many. That’s what the father is. It is accepted to leave, he says, who believes few will return. Aker owner Kjell Inge Røkke is among the billionaires who have chosen to move to Switzerland. Here with Salmar CEO Gustav Witzøe who feels that both the wealth tax and the salmon tax will slow down growth in the farming industry. Photo: Kari Sørbø / news Points to the difference in interest rates abroad Cekov points out that it is difficult to trace the effect on the krone exchange rate of the Swiss emigrants. – Did the krone become weak because people left Norway due to political uncertainty? Or do foreign investors refuse to invest in Norway because they are afraid that the krone will become even weaker? asks Chekov. – We must also remember that many of those who have moved out have not necessarily sold everything they owned in Norway. If they had done that and transferred all the money abroad, it would have had a negative effect on the krone exchange rate. Nordea sees another main explanation for the fall in the krone than political uncertainty. From 2010, the krone became unusually strong against the euro and dollar. Then the debt crisis ravaged Europe with glowing warning lights for, among others, Italy and Greece. – It was not known whether the euro would survive the uncertainty in Europe. Europeans looked for safe harbors, and then Norway was seen as a stable country. Relatively speaking, Norway was a safe haven, but the krone exchange rate therefore became far too strong based on fundamental values, he says. Until last winter, Norway also had a higher interest rate than the eurozone, while last week Norway received a lower interest rate for the first time since before the financial crisis in 2008. At the same time, the central bank is selling kroner because the oil revenues are enormous and are exchanged into Norwegian currency. Thus, the large trade surplus is almost neutral for the krone, according to Cekov. – By and large, the krone is among the currencies with the lowest interest rates. On top of that, we have extremely high uncertainty in the financial markets, which makes it unpopular to sit on Norwegian kroner. That is a far more important explanation than political uncertainty as to why the krone has become so weak, he says. Spetalen is aware that the krone will only get weaker. – Do you have measures to protect yourself? – Far too little. – What is the solution to reverse the trend going forward? – First, they must make arrangements for foreign capital to invest in Norway. In the things we are internationally competitive. Battery factories are just nonsense. Panasonic has an average return of 6 per cent, so you have 12 per cent on salmon and fisheries in Norway. I have more faith that we invest in what we can in the primary industries. Then we can’t tax it in pieces, says Spetalen. Salmon farming has been an industry that has produced high returns in recent years. Therefore, the government thought they could bear an additional tax of 40 per cent, in addition to the corporation tax of 22 per cent. Photo: Gorm Kallestad / NTB
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– The view of Norway is becoming dangerous – news Norway – Overview of news from different parts of the country
