Norway Government Says Central Bank Is Winning Krone Battle

Norway Government Says Central Bank Is Winning Krone Battle

The Norwegian central bank’s efforts to tame the krone are paying off for exporters as the economy of western Europe’s largest oil producer slows, Industry Minister Monica Maeland said. “I don’t know if it’s enough but it is working,” Maeland, who took office in October, said yesterday in an interview in Oslo. “The exchange rate of the Norwegian krone is important for the export industry and the fact that it has weakened is good.”The krone has lost 12 percent against the euro this year, paring gains since 2008 when it emerged as a haven from Europe’s debt crisis. Norway’s purchasing managers’ index released this week showed export orders rose to the highest since June 2011, helping the economy as house prices and retail sales slide.

Central bank Governor Oeystein Olsen has in the past demonstrated his willingness to use interest rates to halt krone appreciation. Olsen said in a Bloomberg News interview in October that the krone has played a part in decisions before and will continue to be an important driver in determining rate moves.

The krone slid 0.1 percent to 8.3775 per euro as of 9:22 a.m. in Oslo.

It’s is still 26 percent overvalued against the euro, according to an Organization for Economic Cooperation and Development gauge of 12 currencies ranked by purchasing power. The government and the central bank have repeatedly voiced concern that excessive krone strength poses a threat to the economy.

Wealth Fund

Norway, which is backed by an $810 billion sovereign wealth fund, is struggling to absorb an oil and gas industry that has driven up production costs and fueled the risk of overheating. Maeland said Norway needs to be creative in how it increases competitiveness.

“We’re going to have an oil and gas industry for a long time but we can use that knowledge in other areas and in other ways, there are lots of possibilities,” she said. “We’re not going to compete on costs; that’s not possible for us.”

Prime Minister Erna Solberg warned in an interview last month that she won’t hesitate to cut spending should budget impulses force up the krone and undermine export competitiveness. Those comments drove down the currency.

While Norway’s oil wealth protected it form Europe’s debt crisis, the government sees the mainland economy, which excludes oil and gas output, slowing to 2 percent this year, from 3.4 percent last year. Gross domestic product by that measure will grow 2.5 percent next year, it estimates.

The slowdown is normal for an economy that has grown as much as Norway has, Maeland said. “It’s going to be slow but we’re still going to grow next year.”

To contact the reporter on this story: Saleha Mohsin in Oslo at smohsin2@bloomberg.net

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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