Weak Norwegian krone likely to result in real wage decrease

The Norwegian krone is down considerably compared to most major currencies since last year, with the downtrend accelerating at the turn of this year.

Last year, a euro cost between 9:40 kroner and 10:60 kroner. In early June, a euro costs as much as 11.90 kroner.

Norway's national data agency Statistics Norway forecasts that a weak krone will likely result in a real wage decrease for many workers in Norway this year.

Wages measured in real terms take inflation into account. When prices rise faster than wages can grow, households are worse off and have less disposable income as a result.

"The weak krone makes inflation more tenacious. Imported goods become more expensive, which helps keep price inflation high for longer," Thomas von Brasch, a researcher from Statistics Norway, said in an analysis published by the data agency.

Statistics Norway currently predicts that inflation in Norway will be 5.6 percent this year. Their previous forecast in March only predicted growth in the consumer price index (a measure of inflation) of five percent.

This means that inflation, driven by a weak krone, will be higher than wage rises this year.

"We assume an annual salary increase of 5.3 percent this year. With an expected inflation of 5.6 percent, this means that real wages will fall slightly this year as well," von Brasch said. The researcher added that real wage growth in Norway has been stagnant since 2015.

In addition to a real wage decrease this year, households' disposable income will see a hit in the form of increased interest rate rises. The central bank, Norges Bank, uses the key policy rate to try and curb inflation.

Inflation is currently well above the central bank's targets. As a result, many predict that the key policy rate will be raised to 3.75 percent, or in excess of four percent. This means more expensive loan and mortgage repayments.