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ECONOMY

Danish economy predicted to have tough 2023 in OECD report

European nations including Denmark are set to feel the pinch of difficult global economic conditions next year, according to a report from the Organisation for Economic Co-operation and Development (OECD).

Danish economy predicted to have tough 2023 in OECD report
The OECD predict fractional growth for the Danish economy in 2023. Photo: Emil Helms/Ritzau Scanpix

The OECD expects Denmark’s economy to get a marginal growth of 0.1 percent in 2023. The forecast is 1.3 percent lower than in the previous report from June this year.

Despite the OECD considerably reducing expectations for Denmark’s economy, analyst Tore Stramer, senior economist with the Danish Chamber of Commerce, in the Nordic country said the forecast was “mildly optimistic” in comments to news wire Ritzau.

The central bank, Nationalbanken, has forecast negative growth of -0.1 percent next year.

“OECD also points out that the slowing down of growth in the Danish economy is happening at a time when the pressure on the labour market is still high,” Stramer said in a written comment.

“The OECD therefore also recommends that fiscal policy should also be restrictive and further restrictions should be considered if pressure from inflation persists,” he said.

The economic co-operation organisation predicted in September growth of 2.2 percent for the global economy next year. That prediction is retained despite the outlook for Europe.

“This shows that the global economy has not been hit by new, serious shocks in recent months,” Stramer said.

Global economy is significantly impacted by the war in Ukraine, which has caused prives to go up.

Central banks have responded to the situation by putting interest rates up.

Tackling inflation should be a political priority next year according to the senior economist with the Confederation of Danish Industry, Allan Sørensen.

“Inflation will subside in 2023 but will still be at a high level. The fight against inflation will need more interest rate increases while fiscal policy must not cause more [inflation],” he told Ritzau.

OECD notes in its report that a significant degree of uncertainty is attached to the forecasts.

But an increased risk of economic downfall in in play due to “insecurity around energy supply, particularly in Europe over the coming two winters,” Stramer said.

“Additionally, there is a risk that restrictions of financial policies will slow the global economy more than expected,” he said.

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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.

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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