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NOK's dependency on oil and how to fix it

Norway is considered to be one of the most economically advanced countries in the world. The life index in the Nordic country is one of the best in Europe. People are generally content with their level of life.

The Norwegian krone is the official currency of the state and it should be said that it is one of the stablest currencies in the world. However, NOK is strongly dependent on oil. In this article, we will talk about the dependence of these two as well as how to fix it in the long term.

Covid-19, Krone, and oil

In March, the rate of the Norwegian krone fell by more than 20%, which may have marked a turning point in the history of this currency. If we take statistics, More than 30% of Norwegian exports are oil and processing products, 26% is liquefied natural gas.

The weakening of the Norwegian currency in recent years is due not only to the decline in oil prices but also to the reduction of its production in the country by 40% over the past 15 years.

The active growth of gas production in the United States puts pressure on European prices for this commodity, creating additional problems for Norway.

Norway's economy is characterized by the so-called Dutch disease. In the late 1990s, the country actively increased oil production, which led to an increase in its exports and the strengthening of the national currency. At the same time, other sectors of the economy could not actively develop due to the lack of competitive advantages in the global market. When the flow of export currency for energy resources began to fall, and the rate of the crown went down, it turned out that other export-oriented industries are not developed enough to compensate for the lost income. This marked a new period in the history of the country when the krona exchange rate lost its support and was significantly lower than the exchange rate of other European currencies.

But Norway's economy also has strengths. Thus, the current ratio of the national debt to GDP is 41% - twice as low as in the eurozone.  This means that the State is well able to finance its expenditures.

The Norwegian economy's significant dependence on oil has not yet disappeared. This means that its dynamics will continue to have a significant impact on the crown rate. As a result of the adoption of the agreements within the framework of OPEC, their participants began to reduce production. In the U.S., it also began to fall due to the closure of low-profit shale companies.

In other words, it is most likely that the bottom of the oil correction has already passed, at least a new departure of the price of futures in the negative zone is not expected. Against this background, a new collapse of the crown is unlikely. The state of Norway's economy allows the state to actively resist recession.

How is it possible to eradicate NOK’s dependence on oil?

The first thing that comes to mind is diversification of the economy:

Online gambling

Online gambling has gained a foothold in the world. Most recently Norway had some discussions regarding the reformation of the online gambling industry. According to the Norwegian gambling media outlet, this discussion is probably one of the most important ones that could possibly determine the future of this industry in the country. Technically online gambling in Norway has strict regulations but people still find a way to make bets.

The gambling industry is one of the ways of diversifying the economy and attracting more customers in this field which could possibly have a positive impact on the Norwegian krone.

Fintech industry

It is no longer a surprising fact that financial technologies developed at rapid steps in the world. We can say that the coronavirus pandemic showed us the impotence of fintech where businesses moved to remote work some of them failed to deliver great results. Although there were enterprises that were prepared for this and managed to come out of the pandemic with minimal losses.

We cannot deny the fact that Norway has one of the most interesting fintech industries in the Nordics but still there is a lot more to be done for the improvement of this field.


To summarize we can say that even though we mentioned two ways of diversification of the Norwegian economy, the impact of oil on the national currency is very high and it is impossible to remove it in just a few years. Norway is one of the largest exporters of oil in Europe and a major member of OPEC. But as coronavirus showed us digital business and digitalization is the future which is inevitable and more countries should adopt it.





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