– It is not favorable as it is now, says Elin Tveit Sveen, who owns and runs Marø Havbruk on Svanøy outside Florø. She gets more for each salmon, but explains that the profit is eaten up by more expensive purchases at the other end, such as expenses for medicine and fish feed. – What we want is stability. Not these swings, even if they sometimes turn out to be lucky. In the last six months, Norwegian companies have received 12 per cent more for goods they export to customers who trade in euros. The explanation is the weak krone, which means that companies receive more kroner for every euro they exchange. And it can be more lucrative. In Dagens Næringsliv, there is speculation that the euro exchange rate may rise to NOK 14 and 15. But no tree grows in the sky, and now several export companies are reporting that the krone exchange rate has reached a level where they would prefer to see it turn around. – Not particularly pleasant The explanations for “it can be too much of a good thing” are several: If the companies get 12 percent more for the goods they export, they also have to pay 12 percent more for the goods they import from the same currency area. The so-called frontline model means that a low krone exchange rate creates wage growth, which in turn increases inflation. On Thursday, new model calculations from the Ministry of Finance showed that the consumer price could increase by 1.25 per cent in the next year. A low krone exchange rate makes it more difficult to recruit foreign labor (whose wages are in Norwegian kroner). Large fluctuations in the currency market make it more difficult for companies to plan long-term. – There are several negative effects with a weak krone exchange rate. The best is a middle ground with ok prices and good demand, says Erlend Vassbotten in Steinvik fish farm. Photo: Midt-Norsk Havbruk – None of the members I have spoken to think the currency situation is particularly pleasant, says Sigvald Sveinbjørnsson. He is the day-to-day manager of Maritime Bergen, which works to look after the interests of the maritime industry in Vestland. Vestland has 43 municipalities, all with a coastline, and is the largest exporting county in the country with around 20 per cent of total mainland exports. A corresponding signal comes from Asle B. Strønen, who is the day-to-day manager of Norske skipsverft, which organizes several shipyards along the coast. – The krone exchange rate is challenging, he says. He points out that purchases from abroad are becoming more expensive and that the krone exchange rate is going beyond the purchasing power of the guest workers in the industry, who mainly come from Poland. – If the krona weakens more against the Polish zloty, there will be even greater challenges in getting hold of people. New reform: The whole of Norway exports Last week, the Minister of Fisheries and the Minister of Industry launched the second part of the reform The whole of Norway exports. The new initiative consists of ten measures to help increase Norwegian exports by 50 per cent by 2030 (oil and gas excluded). – We have to position ourselves in the global market. If we succeed this decade, we will succeed in the next fifty, said Industry Minister Jan Christian Vestre (Ap) when he presented the reform All Norway exports. Photo: Josef Benoni Ness Tveit / news Kristine Kopperud Timberlid is head of Innovation Norway Westland, which exists to “help all Norwegian companies with export ambitions”. She says the “crown pain” has different effects, and divides the member companies into three categories: For the maritime industry, which imports hulls and other large constructions, the weak krone has a negative effect. For the farming industry, which does not import as many input factors, the weakened krona is basically “quite favorable”. For businesses in tourism, which is also an export industry, the krone exchange rate encourages foreign and Norwegian tourists to choose Norway as a holiday destination. Timberlid adds that the business world has become better at hedging against exchange rate changes, and that this “helps to reduce some uncertainty”. – The unstable krone exchange rate is very unfortunate Alfred Bjørlo, parliamentary representative for Venstre – A weak krone in isolation is good for the export industry, but such large fluctuations and extreme effects as we are now seeing create great uncertainty and in the long run is also unfortunate for business in Western Norway. Not least, this becomes serious when we have a government that uses the “good times” a weak krone gives the export industry, to screw up the tax burden on business. The most important thing the business world needs is stability: Now the export business world in Western Norway has the combination of an extremely unstable krone exchange rate and an increasingly unstable tax policy. It is very unfortunate. Roy Stian Farsund, director of corporate markets at Sparebanken Sogn og Fjordane – Businesses want the greatest possible degree of predictability, and a sharp weakening of the krone presents challenges. It leads to a strong increase in the price of imported goods and input factors, which creates uncertainty linked to pricing and can negatively affect demand. In recent years, we see that more and more people are hedging the exchange rate. It is normally not done more than 12 months in advance, and we notice an increased reservation to ensure as high a level as possible. A weak krone leads to “imported” inflation and increased costs for the entire business sector, including for those who, in the short term, benefit from a weaker krone. Export companies, such as the aquaculture industry, get increased income and the tourism industry notices a large increase in orders from foreign guests. Sigvald Sveinbjørnsson, day-to-day manager of Maritime Bergen – Those of our member companies that have income in foreign currency, but expenses in Norwegian kroner, will notice it positively. If you have income in Norwegian kroner, but expenses in dollars or euros, it is exactly the same – with a negative sign. The biggest problem is the uncertainty that comes with the large fluctuations. There is little doubt that inflation will strengthen in line with a weak krone. This makes all imported goods more expensive. This could mean higher interest costs, precisely because Norges Bank manages according to an inflation target, which they are now far behind. So the question is: Why is the Norwegian krone so weak? Does it come from politics? Does it come from oil prices and expectations about expected future oil prices? The problem many of our members are aware of is probably more uncertainty, and especially uncertainty about framework conditions. Gjermund Johannessen, Norwegian Ship Design – Much can be said about currency fluctuations, and there is no doubt that it affects us indirectly to a large extent. Directly, we do not have a large currency exposure, and even if the few Euro contracts we have right now have a positive effect, we try to stick to NOK contracts. We are now on the verge of entering into large contracts with large values. In these contracts, we try to stick to NOK to avoid currency uncertainty. Martin Skaug, Norwegian Seafood Council – A weaker Norwegian krone causes both export prices and prices of imported inputs to be higher, measured in Norwegian kroner. This is exactly what we have seen on the income side, especially now in April, where the export value of Norwegian seafood increased a lot in Norwegian kroner, while measured in dollars and euros it fell compared to April last year. The net effect of a weak krone exchange rate will probably vary between different parts of the industry, and will depend, among other things, on how much imported input factors are used (feed, fuel, etc.). Another important point is uncertainty about how the krone exchange rate will develop in the future. The greater the uncertainty surrounding the development of the krone exchange rate, the greater the uncertainty surrounding both the future costs and income of the Norwegian seafood industry. Erlend Vassbotten, Steinvik fish farm – A weak krone naturally increases the purchasing power of foreign buyers of Norwegian goods, which applies to all Norwegian companies that export. But the best is a middle ground with ok prices and, well, good demand. There are several negative effects of a weak krone exchange rate. Our biggest cost driver is feed for the fish, which is bought in US dollars. Here we see that the costs have increased a lot in the last two to three years, so that our production costs have increased and been negatively affected by the weak krone. Hans Jørgen Fedog, Green Yard Group AS – The krone exchange rate is currently positive for us, who mainly export. It greatly increases competitiveness and provides opportunities for increased value creation in Norway, but we still need better framework conditions from the Norwegian governing authorities to be able to further develop a forward-looking maritime cluster with competitive Norwegian shipyards. We have been in dialogue with the government for a long time about an advance guarantee scheme which is absolutely necessary for the industry, but so far nothing has happened. We have a clear expectation of the government on this point and expect to have this in place as soon as possible. Sverre Søraa, Coast Seafood AS – A weak krone means that Norwegian salmon is still competitive, even if the price is at a historically high level. We are used to a fluctuating krone exchange rate and take care of that. Furthermore, we are unsure whether anyone has enough tools to manage the Norwegian krone exchange rate. Maria Hunvik, Hub For Ocean – For members who import products from abroad, it affects both total cost and gross profit. Stability in the krone exchange rate is important for our members, and business in general. Tom Christer Nilsen, head of business policy at the Bergen Business Council – The krone exchange rate is not among the most important factors that cause unrest in our companies. Questions about inflation, commodity prices and electricity prices are more prominent. Higher import costs are probably hidden within the inflation issue/raw material prices, but the companies do not see them directly as a krone exchange rate issue. When it comes to measures, we would probably say that this is yet another example that the Euro is a small currency, and will have greater fluctuations than, for example, the Euro. What we need then is a more predictable business policy. We think some of this is happening because people are unsure whether Norway is a safe haven after all the shenanigans in the last national budget. Director of Sparebanken Sogn og Fjordane, Roy Stian Farsund, tells news that they see a tendency for more business customers to secure the exchange rate. – Strong devaluation of the krone presents challenges. A weak krone leads to inflation and increased costs for the entire business sector, including those who benefit from a weaker krone in the short term, he says. 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. Higher interest rates mean increased expenses if you have a mortgage 2021 2022 2023 2024 2025 2026 Forecast Norges bank Noregs Bank intervened in the currency market During the corona crash in March 2020, the krona collapsed and weakened by three kroner against the euro in two weeks. The “extraordinary situation” caused Norges Bank to start buying up Norwegian kroner to strengthen the exchange rate. It is the only time in recent times that Norges Bank has intervened in the foreign exchange market, and Ida Wolden Bache has made it clear that similar measures are far in the future. The new central bank governor had to answer several questions about the weak Norwegian krone when she appeared at an open hearing in the finance committee on Tuesday. – Now the export industry gets the combination of an extremely unstable krone exchange rate and an increasingly unstable tax policy. It is very unfortunate, says Alfred Bjørlo (V). Photo: Midt-Norsk Havbruk AS In the new business survey from NAV (published on 9 May), 1 in 4 companies answer that 2023 will be a worse year than 2022. It is especially the economic expectations that are low. – You can talk to 100 export companies and get a hundred different answers, says Knut E. Sunde, who is director of Norsk Industri. In Dagsnytt Atten on 3 May, he stated that the low krone exchange rate “has been a problem”. He points out that some companies are “getting rich” with today’s krone exchange rate, while others are “cheating” on buying expensive input factors abroad. – What do you think about the more extreme predictions about a euro exchange rate of NOK 14 and 15? – Heh, well, the only thing that is certain is that we who call ourselves currency experts are terribly bad at predicting. The Swedes are happy about the record weak Norwegian krone.
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Weak krone creates trouble for export companies – news Vestland
