October 26, 2021

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Interest and currencies, NOK |  The chief economist expects a strong jump for the krona

Interest and currencies, NOK | The chief economist expects a strong jump for the krona

The chief economist believes that the fact that neighboring countries choose to keep interest rates at zero will have consequences for the Norwegian krone.

We will likely have a much stronger krona in the future, says chief economist Jan Ludwig Andreessen at Eika Gruppen on the Nettavisen podcast “Stavrum & Eikeland”.

Andreessen highlights several factors that will affect the NOK.

– In our neighboring countries, they have chosen to keep interest rates at zero and in a negative stagnation, which will make the NOK stronger, Andreessen explains in the podcast.

– And then we will only increase, and then it will be more attractive to foreign investors who now have negative interest rates on their deposit accounts in Europe, to look for the way to Norway, he adds.

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In order to put money on the Norwegian market, foreign investors must first buy the krone.

– If there are enough of them, you will probably do something, they will offer the value of the NOK to buy these securities with interest denominated in NOK, and it will raise the exchange rate of the Krona, notes Andreessen, who believes that the Krona could return to the level that It was eight to nine years ago, so the price of a euro is less than eight kroner.

This is good news for Norwegians abroad and people buying imported goods, but negative for Norwegian exports and the Norwegian economy in general.

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Listen to the full episode with Jan Ludvig Andreassen here:

green shift

The biggest difference from the Norwegian krone we see is against the Swedish krona, according to Andreessen. In Sweden, they chose a completely different interest rate strategy.

– They could have chosen to raise interest rates, but at Riksbank in Sweden they chose a course that guarantees low interest rates and good competition for business and industry at a weak krone exchange rate. In Norway, the opposite is happening, he told Stavrum and Ekland.

The krone exchange rate also has a significant impact on the green turn, Andreessen points out.

– The fact is that the krone exchange rate is very important for the green turn. Not only because you’ve reduced Harry’s trade and Granca’s voyages by twice as much, but also because you’ll be creating new business, he says.

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In September, Andreassen was at a conference in Orkdal, where Norsk Industri presented its battery production project in Norway, a production that rivals a similar Swedish project.

“When the Swedes have low interest rates and exchange rates, they are strong in acquiring this battery factory, in addition to the fact that they also have a foothold within the European Union,” he explains.

destroying the economy

The economist believes that there are several long-term goals of the Norwegian economy that the strong krone policy and high interest rate policy are destroying:

– What we see next year is a growth in industrial investments, and unfortunately a greater decline in oil and energy investments, so that their net is negative. Another argument, Andreessen says, is that there is no reason to raise interest rates.

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At the same time, he points out that it is a positive in the Norwegian business to be exploited.

– What I think is that a lot of the positivity has some of its background in the weak krone exchange rate, we are more competitive than we have been for a long time. Remember that the euro fell to 7.5, and now we’re at 10. But we’re at 11 and 12, without inflation.

Therefore, the chief economist believes that one should try to raise the exchange rate to 11 and 12 kroner to the euro, rather than lower it to 8 and 7 again.

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