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DANISH ELECTION 2015

ECONOMY

Denmark goes to polls on sustained growth

Positive economy figures released on Friday are likely to give Prime Minister Helle Thorning-Schmidt a boost as she aims for re-election.

Denmark goes to polls on sustained growth
Thorning-Schmidt is hoping to ride the improving economy to victory. Photo: Jens Nørgaard Larsen/Scanpix
Denmark registered its seventh straight quarter of growth in January-March, rising by 0.4 percent from the previous three-month period, data showed Friday just three weeks ahead of a general election.
 
This is the first time the Scandinavian country has enjoyed such a long period of growth since 2000.
 
Earlier this week, Prime Minister Helle Thorning-Schmidt called legislative elections for June 18 even though her Social Democratic-led government is trailing the right-wing opposition in the polls.
 
 
Under election regulations she had to hold a vote by September 14, and she is believed to have wanted to take advantage of Denmark's strong economic showing.
 
The country's gross domestic product (GDP) reached its highest level in terms of volume since 2008, Friday's figures showed.
 
Household consumption rose by 0.7 percent from the previous quarter, boosted by rising optimism about the labour market.
 
Exports climbed 2.0 percent, bolstered by the weakening currency, the krone.
 
“There was a strong increase in the exports of goods, while there was a decline in both the export and import of services,” Statistics Denmark said.
 
On the other hand, there was a 2.6 percent drop in investments in the quarter, primarily in the construction sector, though investments remain up year-on-year.

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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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