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ECONOMY

Denmark’s national debt at lowest level for 13 years despite pandemic

The Danish state debt is at its lowest level as a proportion of GDP since 2009, according to new data from the central bank.

Published: 24 January 2022 11:49 CET
Denmark's economy emerged strongly from the Covid-19 crisis in 2021, keeping the national debt from increasing as had been predicted.
Denmark's economy emerged strongly from the Covid-19 crisis in 2021, keeping the national debt from increasing as had been predicted. Photo: Kristian Djurhuus/Ritzau Scanpix

Nationalbanken figures show that the Denmark’s state debt of 438 billion kroner in November 2021 is 17.8 of the national GDP, which is the lowest level since 2009.

GDP, a metric for the strength of the economy, is a measure of the value of the country’s economic output in a given year.

The Danish Chamber of Commerce said it was “amazing” that national debt was at its lowest share of GDP for 13 years in the face of the Covid-19 crisis and compensation packages for businesses which were introduced in response to it.

“If we rewind to December 2020, the Ministry of Finance said it expected the national debt to end up as high as 27 percent of GDP in 2021,” the organisation’s senior economist Tore Stramer said.

“That means that the national debt in 2021 increased by around 200 billion kroner less than feared,” Stramer said.

The surprising result is connected to the strong response of the Danish economy to the coronavirus crisis last year, according to the economist.

That response has seen record levels of employment with several sectors experiencing labour shortages.

“In addition to that, there is a particularly strong growth in spending that has lifted activity in the Danish economy,” Stramer said.

“That has really lifted state revenues from personal taxes, business taxes and VAT,” Stramer said.

READ ALSO: More foreign nationals have full time jobs in Denmark than ever before

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ECONOMY

Danish national bank says wage increases could cause inflation

Recent wage increases on the Danish labour market are the highest seen in years and could result in increased inflation, according to a new economic forecast from Denmark’s central bank, Nationalbanken.

Published: 22 March 2024 13:56 CET
Danish national bank says wage increases could cause inflation

“There is still a certain pressure from higher wages. That applies particularly in industries that deliver services because these need relatively large amounts of labour,” Nationalbank director Christian Kettel Thomsen said in a press statement.

The central bank said it expects higher wages to exert an upward force on inflation during the next few years.

But the bank also noted that inflation is moving in the right direction and is expected to arrive at an overall level of 2.2 percent in 2024.

The Nationalbank uses EU-adjusted figures, which placed the inflation level for Denmark at 0-6 percent in February compared with February 2023.

As such, the Danish central bank expects inflation to increase between now and the end of the year.

In 2025, the Nationalbank predicts that inflation will rise to 2.6 percent before later falling off to 1.7 percent.

The spring of 2023 saw a series of new collective bargaining agreements across Denmark’s labour market system. The new agreements secured wage increases for workers in the vast majority of sectors. These wage rises were themselves a response to inflation in 2022, which was provoked by factors including the energy crisis and the Russian invasion of Ukraine.

Because the wage increases agreed in the labour deals are spread over a number of years, their effects will still be felt in 2025. The Nationalbank said in its forecast that it expects wage rises of over 5 percent until 2025, when a new round of collective bargaining will take place.

Analyst Las Olsen, a senior economist with Danske Bank, said in comments to newswire Ritzau that he agreed with the central bank’s assessment of the situation.

But Olsen also said that he expects the pressure on the economy to be less than feared.

“We also expect to see this effect, but not a powerfully as the Nationalbank expects,” he said in a written comment.

That is because “wages in our view will rise slightly less steeply than the collective bargaining agreements suggest”, he said.

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