Norway Pushes Panic Button: “We’re In A Crisis Now, We Can’t Deny That”
We’ve spent quite a bit of time documenting Norway’s precarious balancing act in the face of slumping crude prices.
On the one hand, falling crude puts pressure on the krone which essentially allows the Norges Bank to compete in the regional currency wars without resorting to the same type of deeply negative rates as the ECB, the Riksbank, the Nationalbank, and the SNB. In short, a falling krone preserves export competitiveness in a world gone Keynesian crazy.
At the same time, falling crude puts enormous pressure on the country’s economy, which is heavily dependent on oil production
Additionally, collapsing crude revenue means the country will soon be forced to drawdown its $830 billion sovereign wealth fund (the largest in the world) to plug the various budget leaks caused by “lower for longer.”
Now, Norway has declared that its oil industry has entered a “crisis.”
“[The] industry is in a crisis now, we can’t deny that,” Bente Nyland, director general of the Norwegian Petroleum Directorate, told Bloomberg who reminds us that “Norway depends on oil and gas for about one-fifth of its economic output and nationwide, the petroleum industry has cut almost 30,000 jobs.”
The government last year announced plans to boost spending on the way to shoring up the flagging economy and officials says those measures – which are part of the reason why Norway will pull money from the SWF – should be sufficient to offset the pain from lower crude prices. “Finance Minister Siv Jensen says budget proposals put forward last year already contain ‘a lot of expansion’ and will help stem job losses,” Bloomberg continues, before noting that “the question is how quickly the economic adjustment brought on by a weaker krone will manifest itself.”
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