The weakening of the Norwegian krone has transformed Norway, typically known for its high costs, into a more accessible destination for global tourists. As the krone depreciates against major currencies, the country has seen a significant increase in tourism, particularly from countries like China, where Norway’s natural beauty is now more affordable.
The Norwegian krone has depreciated by about 6.50% against the US dollar and 5.45% against the Euro since the beginning of 2024. This depreciation has made travel to Norway more affordable, resulting in increased spending by tourists on luxury goods, such as clothing from high-end brands like Moncler and Høyer. The influx of tourists is benefiting local businesses and boosting the overall economy.
However, while the tourism sector flourishes, Norwegian consumers and businesses that rely on imports are feeling the pinch. The weaker krone has increased costs for Norwegians traveling abroad and made international goods more expensive for local retailers.
Tourism in Norway is expected to generate $4,682 million (€4,291 million) in 2024, with a projected annual growth rate of 3.03% through 2029. Visitors from Germany, the United States, Sweden, the Netherlands, and Denmark are contributing to this growth, particularly during the summer months. Popular activities include kayaking in fjords, hiking, camping, and in the winter, seeing the Northern Lights and engaging in skiing and glacier exploration.
Norway’s investment in sustainable tourism is also paying off, attracting environmentally conscious travelers interested in whale watching, polar bear expeditions, and bird watching.
The depreciation of the krone is partly attributed to the decline in Norway’s oil and gas sector, along with recent tax increases, including a higher wealth tax and an exit tax for billionaires. These factors have discouraged investment and led to capital outflows.
Kyle Chapman, a forex market analyst, notes that the krone’s weakness is also due to reduced investor risk appetite and a faster-than-expected decline in Norwegian inflation. Despite these challenges, the krone could recover once global markets stabilize.
Norway’s central bank, Norges Bank, has acknowledged the impact of the krone on inflation and economic activity. Governor Ida Wolden Bache emphasized that while the bank does not target the exchange rate, it remains a concern due to its influence on the economy. The future of the krone may be shaped by ongoing changes in the global energy landscape and Norway’s transition away from petroleum.
As Norway continues to navigate these economic shifts, the tourism sector stands out as a bright spot, offering growth opportunities and helping to offset some of the challenges posed by a weaker currency.
