Weak Currency Hailed by Norway Minister for Role in Aiding Trade
(Bloomberg) -- As the U.S. reignites talk of currency wars, the new trade minister in western Europe’s biggest oil and gas exporter says a weak exchange rate is helpful.
To underline the point, Torbjorn Roe Isaksen, Norway’s trade and industry minister since January, promised always to take the krone rate into account when setting budgets.
“There’s no doubt that a weak krone has been extremely important especially for Norwegian mainland export businesses these past years, and especially in the wake of the oil-price drop,” Roe Isaksen told Bloomberg on Thursday.
“As a government, we must always take into consideration the consequences for the krone exchange rate when we prepare budgets,” he said.
Norway’s economy is growing faster now that oil prices are recovering. That’s making the krone more appealing to investors. But the government is making clear it’s not keen on the appreciation that comes with that demand.
The notion of a potential new currency war made its way to the radar this year after U.S. Treasury Secretary Steven Mnuchin drove down the dollar after saying in Davos, Switzerland, that a weak exchange rate was helpful. He has since said his intention isn’t to drive it lower, but his remarks drew a sharp rebuke from European Central Bank President Mario Draghi.
The Norwegian krone has rallied 4 percent since hovering near a record low against the euro in December. For the past two years, Norway’s central bank has targeted the currency to support exports after a plunge in oil prices brought the country’s biggest industry to its knees.
After spending record amounts of Norway’s petroleum wealth over the past years to keep the economy afloat, the government is this year putting on the brakes. The Conservative-led coalition plans to use its oil income and money from a $1 trillion wealth fund to plug a deficit equal to 7.7 percent. The fiscal boost will be 0.1 percent, down from 0.4 percent last year.
Roe Isaksen, 39, said the government is wary of “expansionary budgets” that could contribute to excessive activity in the Norwegian economy and a “much stronger krone.”
“If we hit the gas pedal too hard, that can have a direct consequence in out-competing Norwegian jobs,” he said.
A member of Prime Minister Erna Solberg’s Conservatives, Roe Isaksen took over the Trade and Industry Ministry in a reshuffle last month after the Liberals joined the government. He’s now in charge of overseeing Norway’s substantial holdings in companies such as DNB ASA, Telenor ASA and Norsk Hydro ASA. The government has previously signaled it’s prepared to reduce some stakes, but there have been few signs of any major moves.
“I have a very pragmatic attitude toward state ownership,” he said. “We will sell if that’s reasonable and we can get a good price, but it’s not a matter of principle for me to reduce the state’s stake everywhere.”
The government also stands to get a considerable windfall as companies such as DNB and Telenor raise dividends.
“It’s good news when things are going well,” Roe Isaksen said. “As a shareholder we expect that the companies deliver competitive returns. The boards and the management must run the shop. I’m not getting involved in that.”
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