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MONEY

How Norway’s weak krone could affect your wages this year

The effects of Norway's struggling krone have been felt across everyday life in the country. Ahead of wage negotiations between unions and employers, the future strength of the currency could impact salary rises. 

Published: 8 March 2024 11:57 CET
Updated: 20 March 2024 12:15 CET
Pictured are people during a meeting presentation.
Norway's weak krone could yet affect how much your wages increase next year. Pictured are people during a meeting presentation. Photo by Rodeo Project Management Software on Unsplash

Norway’s krone has plummeted against other major currencies in recent years, impacting everything from inflation to interest rates as a result. 

For some sectors of Norwegian industry, the weaker krone has actually been good news. This is because Norwegian exports have become cheaper and, therefore, more attractive. 

Norwegian exports becoming more attractive has resulted in a healthier balance sheet for many companies in Norway. 

In the coming weeks, unions will lock into negotiations with employer organisations to negotiate this year’s collective bargaining agreement. 

Pay and rights in Norway are governed by collective agreements (tariffavtaler), which typically have a duration of two years.

READ MORE: What is a Norwegian collective bargaining agreement?

Every alternate year, employers and unions engage in renegotiations of the entire collective agreement, known as the main settlement (hovedoppgjøret).

This year’s talks are centred on a main settlement. Ahead of talks, unions have said they want to secure a real wage increase this year. This is where wages rise more than inflation. 

Unions have already said there is a willingness to strike among members if favourable terms aren’t secured. 

The Confederation of Norwegian Enterprise (NHO) is one of the largest parties representing employers at the negotiating table. 

One of its three principles heading into negotiations is to secure businesses and jobs. For this to happen, any wage rises must ensure that Norwegian industry remains competitive.

A fluctuating krone would threaten Norwegian competitiveness if wage increases are too high. 

“In order to secure businesses and jobs, wage developments must safeguard the industry’s competitiveness. The krone exchange rate has been shown to vary a lot, and the wage supplements that are given now must also be able to withstand if the krone were to strengthen,” the NHO’s negotiation principles read. 

It has also pushed for flexibility in negotiating a reasonable portion of the wage increase at a local level to protect businesses and industries that are struggling. 

“There is still a lot of tension in the team. Many companies are doing well, while others are struggling. It underlines the importance of a good balance between central and local negotiations that provide opportunities for adaptations to the individual company’s financial situation,” CEO of the NHO, Ole Erik Almlid, said in a press release. 

How likely is it that the Norwegian krone strengthens significantly? 

The Local recently spoke to Dane Cekov, a currency strategist at Nordea. The currency expert told The Local that there were signs that the krone was starting to stabilise. 

“For now, it would seem that the krone exchange rate against the euro and US dollar appears to be stabilising. Still, a lot can happen this year… Since the New Year, it has been pretty much stable, from 11.2 kroner against the euro to trading for roughly 11.4 in the last few months,” Cekov said.

“So yes, I think, if nothing crazy happens this year, it should trade around here for a while. But overall, we expect it to end up closer to 11 than 12 kroner against the euro at the end of the year,” Cekov said.

However, external factors, like inflation in the US could lead to a further fluctuation for the Norwegian krone. 

READ MORE: What’s next for Norway’s weak krone?

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ECONOMY

What lower inflation in Norway means for you 

Inflation in Norway continues to slow. However, the cost of living in the country isn’t slowing as quickly as economists expected. Here’s what that means to you. 

Published: 10 May 2024 11:44 CEST
What lower inflation in Norway means for you 

Inflation is slowing 

Norway’s Consumer Price Index, CPI, which measures changes in prices for household goods and services, has slowed yet again. 

Between April last year and the same month this year, prices in Norway rose by 3.6 percent. It marks the third time that price increases have been below four percent since the start of 2022. 

The figures, released by Norway’s national data agency Statistics Norway, mark the fourth month in a row where the 12 monthly inflation figure has been lower than the yearly figure from the month before. This means prices are rising less rapidly than before. 

“Price growth decreased for the fourth month in a row in April. Prices are still higher than they were at the same time last year for most goods and services, but they are generally rising more slowly than before,” Espen Kristiansen at Statistics Norway said. 

Food remains one of the biggest contributors to inflation 

The price of food and non-alcoholic beverages rose by 3.3 percent from March to April, according to Statistics Norway. 

Chocolate, soft drinks, coffee, and citrus foods saw the biggest price increases, which the national data agency called “unusual.” 

What wasn’t unusual, however, was the cost of food rising following Easter, when many supermarkets ran offers to compete for customers. 

“The rise must be seen in the context of the fact that large offer campaigns in connection with Easter dampened prices in March,” Kristiansen said. 

The figures for April show that food prices in Norway have increased by 6.8 percent compared to a year ago. 

The rising cost of food and drink in Norway could potentially outgrow wages this year, even if expected pay bumps will outpace forecasted inflation overall. 

Economists expected inflation to fall more 

Inflation hasn’t eased as much as some experts were expecting. Core inflation, which excludes energy prices and taxes, was measured at 4.4 percent year on year in April. This is above what economists surveyed by the newswire Reuters expected. 

Norges Bank, the country’s central bank, raised the policy rate to a 16-year high of 4.5 percent in December. The bank has said that inflation should generally be around two percent, so it has used interest rates to curb price increases. 

As inflation isn’t falling much quicker than expected, economists predict that the central bank may wait until December before slashing rates – which for consumers means that loan and mortgage repayments will remain high for the foreseeable future. 

“The fall in inflation has not been much greater than Norges Bank has thought. This, therefore, indicates that an interest rate cut may come in December instead of September,” Kjersti Haugland, chief economist at DNB Markets, told public broadcaster NRK. 

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