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Economically stable Denmark signals end of coronavirus help for businesses

Denmark is to withdraw financial support for businesses impacted by the coronavirus pandemic as the country continues to return to normal conditions following the end of general Covid-19 restrictions.

Published: 30 September 2021 17:20 CEST

Shoppers have returned to streets in strong numbers. Denmark has signalled the end of Covid-19 support for businesses by the end of the year.

Shoppers have returned to streets in strong numbers. Denmark has signalled the end of Covid-19 support for businesses by the end of the year. Photo: Signe Goldmann/Ritzau Scanpix

New rules taking effect on Thursday mean that only businesses which have lost 45 percent or more of their turnover due to the pandemic can apply for help paying for overheads.

The provision will remain in place for the rest of the year, according to a statement from the Ministry of Industry, Business, and Financial Affairs.

Previous rules, in effect since July, also allowed self-employed people with losses of 45 percent or more of turnover to be compensated by up to 90 percent. That expires as scheduled on Thursday.

“Denmark’s economy is barrelling forwards after corona. More Danes than ever are working and the economy is expected to grow by 3.8 percent this year,” the ministry said in a statement.

Unemployment levels have been falling throughout the period following the post-lockdown reopening.

The number of people out of work fell by 5,600 to a total of 101,300 between July and August, according to seasonally-corrected data from Statistics Denmark. That brought unemployment to its lowest number since January 2009.

READ ALSO: Why does Denmark have so many job vacancies?

An estimate for economic growth during the second quarter of this year has meanwhile been raised after an earlier projection proved too low, revised Statistics Denmark figures show.

GDP is now estimated to have grown by 2.8 percent in the second quarter. The earlier estimate was 2.3 percent.

“We are now living in a society without corona restrictions. And that makes a big difference to Danish businesses, which for the most part have got their wheels turning again,” businesses minister Simon Kollerup said in the statement

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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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