The summer holiday will be expensive if you are planning to go abroad. The weak krone means that everything you shop abroad costs more. On the first working day after Pentecost, the foreign currencies skyrocket when measured against the Norwegian krone. 1 euro = NOK 12.01 1 am. dollar = NOK 11.20 1 British pound = NOK 13.89 1 Danish krone = NOK 1.61 Here are ten questions and answers about the Norwegian krone, and how you will feel about it in the short and long term. But first of all: Why is the krona so weak? – There are many reasons for that, right now there are a sudden number of factors working at the same time. The krone is a small currency. This means that in times when there is turbulence in the world and market picture, investors will gravitate towards what they perceive as safe havens, which are often larger currencies, says chief economist Kjersti Haugland at DNB. BELIEVE IN RATE RAISING: Chief economist Kjersti Haugland at DNB believes the weak krona will cause interest rates to reach a peak of 4 per cent. Photo: Hanna Johre / NTB The oil price is not as high as it was. And Norges Bank has not raised the interest rate as much as other countries. Investors will place the money where there is a high interest rate to get the most return. – I believe the interest rate differential is the most important factor, says Olav Chen, head of allocation and global interest at Storebrand. He explains it like this: – If the interest rate is 5 per cent in the US and 3 per cent in Norway, investors like me will exchange kroner for dollars and put the money in the bank in the US. The interest rate is highest there. So I sell the currency (krona) that has a lower interest rate, says Chen. How long has it been? – There has been a long-term weakening of the krona that goes back ten years. The dollar has become 90 percent more expensive in ten years. The euro has gone up 60 per cent in the same time, says Haugland. High oil prices and large investments in oil and gas made Norway attractive for investment. There was high and stable economic growth. The price of oil has fallen, investments in oil and gas have decreased, and the ripple effects from the oil industry are lower than they were. What does it mean for the summer holidays in different countries? – This means that it will be more expensive to go on holiday. This particularly applies to countries with dollars, euros or pounds, says Haugland. Half of Norwegians plan to travel abroad during the holidays, according to figures from Virke reiseliv. Virke has also asked Norwegians what they plan to spend on holiday in total during the year. The average here has fallen from 42,000 to 36,000 in the past year. – This can mean that you travel for one week instead of two, that you choose a cheaper type of accommodation or that you choose “all inclusive”. Then you have better control over how much money the holiday will cost, says Audun Pettersen, industry director for tourism in Virke. CHEAP HOLIDAYS: If you want to use the currency, you can take a trip to Argentina. Here from the capital Buenos Aires. Photo: NATACHA PISARENKO / AP Is there any place where we Norwegians do not feel the currency crisis? – The only place where the krona has become more valuable so far this year is Argentina, says Olav Chen. The Argentine peso has fallen 45 percent against the Norwegian krone over the past year. He adds that Turkey is also favorable in terms of currency for us Norwegians. The Turkish lira is down 6 percent against the Norwegian krone in the past year. And during the last five years down a whopping 70 percent. South Africa and South Korea are other countries against which the Norwegian krone is still particularly strong so far this year. Is there anything good about the weak krone? BECOMING MORE EXPENSIVE: Olav Chen in Storebrand says the weak krona makes goods more expensive in Norway, since much of what we buy is imported. Photo: ISMAIL BURAK AKKAN / news – The Norwegian export sector is becoming much more competitive. So, for example, the fishing industry and furniture produced in Norway benefit from this, says Chen. It will also be cheaper to be a foreign tourist in Norway. – I also think there will be a wave of Danish, Swedish and German tourists to Norway. This takes effect quite immediately, says Chen. Does it seem that more people want to holiday in Norway because of this? – Our members report good booking numbers for the summer, especially for foreigners, says Audun Pettersen in Virke. GOOD FOR TOURISTS IN NORWAY: Audun Pettersen in Virke says Norway is an attractive holiday country now that the krone exchange rate is low. Photo: Virke He believes that more foreigners will holiday in Norway, but that Norwegians will travel abroad as before. The popular destinations are as before: Spain, Sweden, Denmark, with Greece and Italy close behind. – Norwegians traveled a lot in their own country during the pandemic. If we hadn’t done that, more people would probably be holidaying in Norway now. But for foreigners, Norway now appears more affordable, says Kjersti Haugland. Increased food prices The comparison of food prices and the wage trend says something about whether you get more, less or the same amount for your money. When the development of food prices is higher than the development of wages, it means that food has become more expensive. Both figures are averages for the specified period. Read more about sources and reservations here. How much food prices have increased in the last year, compared to wage developments What does this mean for the goods we buy? Inflation is a word we’ve heard a lot over the past year. Another word is price increase, meaning that what you buy in the store becomes more expensive. Since much of what we buy is imported from abroad, a low krone exchange rate will make things worse for Norwegian consumers. The stores enter into agreements and make purchases today. These are goods that you and I will buy for the winter. – The weak krona will lead to higher prices and inflation in six months, says Chen. – So Norwegians don’t just get an expensive summer holiday, it will be a very expensive Christmas shopping? – Exactly. Is there hope that the krona will strengthen, or will it get even worse during the summer holidays? Haugland says she does not think there will be any significant changes in the short term, but that the USA may become a more affordable country to travel to in a year’s time. – I think the dollar is on its way to becoming weaker. You might want to pay 10 kroner for 1 dollar in a year. For the euro, I think it will be as it is now. Olav Chen believes the US will experience a crisis within two years. This will mean a decline in the economy, and interest rate cuts that will spread to the rest of the world. – It will probably involve a lot of pain before you get cheaper dollars, he believes. 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 2021 2022 2023 2024 2025 2026 Forecast Norges bank What does that mean for the interest rate? Rent is an important reason why we are where we are now. We no longer have the higher interest rate (compared to the other countries) to offer foreign investors. The dilemma for Norges Bank is this: Raising the interest rate will (probably) strengthen the krone. But it will be negative for purchasing power and Norwegian borrowers. – But I think they will raise the interest rate, with an interest rate peak of 4 per cent this autumn. And I think it will be held until the end of 2024. What can Norway do to strengthen the krona? – As we have discussed, Norges Bank will raise the interest rate to prevent it from weakening further, says Haugland. Olav Chen says the same. Higher interest rates are the only medicine. – Norway has become a low-interest country. We have to close the gap to Sweden, Europe, Great Britain. There will be at least three interest rate hikes. Perhaps the peak will not be 4 per cent, but 4.25 or 4.50, warns Chen.
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This is how you will notice the weak krona – news Norway – Overview of news from different parts of the country
