Norway is targeting longer term measures to protect the economy from a strong krone as its recent weakness is helping some exporters, Prime Minister Erna Solberg said.
“I can’t see any short-term way” to take the pressure off the exchange rate, she said in an interview yesterday after a speech in Oslo. “It’s the long-term policies that are important -- making sure our tax system is competitive, investing in infrastructure and diversifying our economy.”
Solberg last week warned that Scandinavia’s richest nation may face a “hard landing” unless it’s able to reduce its reliance on oil and bring down output costs. The country has used its oil wealth, which it has funneled into an $850 billion wealth fund, to shield itself from Europe’s debt crisis.
The premier said in a speech yesterday that a drop in the krone has taken some pressure off exporters in non-oil industries.The currency has slid 11 percent against the euro over the past year, in part as Europe emerged from its debt crisis, cooling demand for assets in AAA rated Norway.
The krone recently showed renewed strength, rising about 2 percent against the euro since a low in December.
The currency gained 0.03 percent to 8.3456 per euro as of 3:17 a.m. in Oslo.
The economy of western’s Europe’s largest oil exporter is now struggling with a stagnant crude price, which is threatening the oil investments that have been a catalyst for growth. Statistics Norway this month cut growth forecasts in the mainland economy, which excludes oil and gas, through 2016 as oil investments fall and record consumer debt levels weigh on household spending.
The statistics agency sees mainland growth at 1.9 percent this year, 2.4 percent next year and 2.9 percent in 2016. The economy expanded 2 percent last year.
A short-term decline in oil prices will have a limited effect on the economy, according to Solberg.
“If it falls to a lower average level, then, of course, investments in the oil industry will fall and that would have an effect,” she said. “This is a weakness in our economy. We have to be prepared.”
The Conservative-led government has pledged to stop eroding trade competitiveness as it prepares for more tax cuts and infrastructure investments.