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ECONOMY

Danish inflation outpaces EU average

Inflation in Denmark is at an historic low but still higher than the European average, new figures from Statistics Denmark have revealed.

Published: 22 July 2015 08:45 CEST
Danish inflation outpaces EU average
Photo: Colourbox
Consumer prices rose by just 0.4 percent in June compared to the year before, which is well below the normal increase of one to percent each year, Berlingske Business reported on Tuesday. 
 
But even though prices are relatively stable for Danish consumers, Denmark’s rate of inflation is still higher than the cumulative average of all other EU countries. The 28 EU nations have had an average inflation rate of 0.1 percent and prices in the 19 eurozone countries have increased by 0.2 percent. 
 
According to figures from Statistics Denmark, Norway has seen the highest inflation at 2.6 percent while Cyprus has had a price deflation of 2.1 percent. 
 
Earlier this year, economists were worried that Denmark might slip into a recession after consumer prices fell in January for the first time in 60 years. The drop proved short-lived however, as the national price of goods and services increased 0.2 percent in February 2015 compared to the same month last year. 
 
2015 has been seen by economic prognosticators as the year that Denmark will finally shake off the effects of the financial crisis. The Confederation of Danish Industry (DI) released an economic prognosis earlier this year that called for “significantly better developments” through to 2016.  
 
“This year and next year, the outlook is for more normal growth rates in the Danish economy at about 1.5 percent. With that, we expect significantly better developments that we have had in a long time,” DI’s prognosis stated.
 
“There is a tailwind for consumer spending from all directions at the outset of the present year. Real wages are strongly increasing as a result of falling consumer prices, employment continues to increase and interest rates are at all-time lows,” the report added. 

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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.

Published: 30 May 2023 15:46 CEST
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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