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TRADE

Trade surplus jumps as euro slumps

Germany's trade surplus leapt higher in March, official data showed on Monday, with the euro's fall in value against other major currencies helping crucial exports rack up solid gains.

Trade surplus jumps as euro slumps
Photo: DPA

The trade surplus for Europe’s biggest economy jumped to €17.2 billion ($22.2 billion), from €12.7 billion in February according to figures released by the national statistics office.

The result was also much larger than expected, topping an average analyst forecast of €14 billion compiled by Dow Jones Newswires.

German exports were largely responsible for the gain, posting an increase of 23.3 percent in March compared with the same month a year earlier, while imports were 18.3 percent higher.

According to figures provided by the German central bank, the country’s current account of the balance of payments – a broad measure of trade with other countries – showed a surplus of €18 billion in March. That was also well above a forecast of €12.5 billion, and the March 2009 figure of €12.3 billion.

Germany lost its title of leading global exporter to China last year but is getting a boost now from the euro’s fall in value against other major currencies as a result of the Greek debt crisis.

On Monday, Europe’s single currency traded for $1.29 after bouncing back from €1.2523 – its lowest level since March 2009 – following the announcement of a massive eurozone rescue package worth more than €750 billion.

A top German economist said Sunday the euro could weaken to parity with the US dollar, “as long as uncertainty over Greece and other countries on the periphery of the euro area continues.”

Thomas Mayer, chief economist at Deutsche Bank, told the Bild am Sonntag weekly: “I think we could soon see 1.20 against the dollar and a further decline in the direction of parity is definitely possible.”

That would cause energy prices in the eurozone to spike however, and probably set inflation back on a sharply steeper upwards curve.

On a monthly basis meanwhile, German exports gained a seasonally corrected 10.7 percent in March, while imports were up by 11.0 percent, the Destatis data showed.

Exports have helped the German economy emerge from its worst recession since World War II, and the economy ministry said Friday that industrial output shot up by four percent in March, a day after unveiling a spike in industrial orders.

“In light of the robust upturn in domestic and foreign demand for industrial output, it should continue in the coming months,” a ministry statement said.

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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