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Has it become harder to pay for unforeseen costs in Denmark?

An increasing number of households in Denmark find it hard to make ends meet, meaning unforeseen bills and costs can be difficult to pay, according to a media report.

Published: 19 December 2022 16:18 CET

Has it become harder to pay for unforeseen costs in Denmark?

More Danes appear to consider themselves vulnerable to unexpected high costs than they did in 2021, but the difference is relatively small according to an expert. Photo: Kristian Djurhuus/Ritzau Scanpix

A ‘weak’ increase has been observed since 2021 in the number of people whose budgets are so tight that an unforeseen cost can bring their finances to the brink of collapse, broadcaster DR reports based on analysis from national data agency Statistics Denmark.

That means fewer people are confident they’d be able to cover the costs of things like emergency home repairs, a car breaking down or costly dental treatment.

The analysis is based on 6,000 interviews conducted from February to May this year and therefore does not take inflation in the latter part of this year into account.

Some 7.4 percent of the Danish population are “economically vulnerable” Statistics Denmark concluded, compared to 7 percent in 2021. That represents an increase from 398,000 to 422,000 people.

“I’m surprised the number hasn’t gone up more. My impression is that a lot more people are worse off,” Danske Bank economist and senior analyst Louise Aggerstrøm told DR, noting the results are based on subjective interview responses.

The proportion of people who said they wouldn’t be able to pay an unexpected cost of 10,000 kroner or more without borrowing was found to be 20 percent, but has nevertheless fallen compared to 2018, DR writes.

The relatively stable figures may represent a good level of savings in private economies, Aggerstrøm noted.

“We’ve been under strain but we are also coming from a period where Danes were good at saving up,” she said.

“That applies both before and after the Covid-19 epidemic,” she said.

READ ALSO: Inflation down in Denmark but forecasts tentative for 2023

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Explained: Why Denmark's economy is looking in such extremely good shape

“When I stood here a year ago and presented my first financial statement, it was with a message that the Danish economy was heading for a soft landing. We have since been strengthened in that assessment,” Stephanie Lose, Denmark’s economy minister, said at a press conference announcing the government’s Økonomisk Redegørelse, or financial statement, for May.

In the press statement, she said, “optimism is returning to the Danish economy”, with the economy likely to improve further in the coming year.

“We have carried out reforms that make Denmark richer and help to secure the necessary workforce for Danish companies,” she said.

How has the government changed its growth forecasts?

The government has increased its expectation for Denmark’s growth rate since its last statement in December, with it now expecting 2.7 percent growth in 2024, up from the1.4 percent it expected for the year in December.

It has also upgraded its expectations for 2025, predicting growth of 1.8 percent compared to the 1 percent it expected back in December.

Lose said that the pharmaceutical company Novo Nordisk, which is expanding rapidly as a result of the success of its weight-loss drugs Ozempic and Wegovy, had driven much of Denmark’s recent growth, with the reopening of Denmark’s gas field, the Tyra field, would start to contribute to growth soon.

“In the past two years, the pharmaceutical industry in particular has driven growth in the Danish economy, while there has been stagnation or decline in large parts of the rest of the economy,” she said. “In the coming years, other industries again look set to contribute to growth. Added to this is the reopening of the Tyra field in the North Sea, which also contributes to growth in GDP.”

What does the government expect to happen to inflation?

Denmark’s inflation rate fell rapidly from a peak of over 10 percent in October 2022 to below 2 percent in September 2023, where it has stayed ever since. But Lose said she expected the rate to edge up over the coming years.

“Inflation has fallen quickly and faster than expected,” Lose said. “In the new forecast, we expect inflation to rise in the coming months, as the prices of services and energy pull in the direction of slightly higher inflation.”

What does the government expect to happen to employment?

Thanks mainly to Novo Nordisk increasing staffing to manage the success of its new drugs, and the bounce back from the pandemic, employment has also held up better than expected.

Employment soared by some 160,000 people between 2021 and 2023, and the government now expects the number of employed people to grow by a further 13,000 in 2024 but to then fall by 18,000 in 2025.

“Employment has long been at a sky-high level, so it is estimated that we will see some adjustment. But we do not expect an extensive setback, because the Danish economy stands on a rock-solid foundation,” Lose said.

What does the government expect to happen to housing prices?

The government has significantly upgraded its expectations of what will happen to the price of domestic property this year. It now expects prices to increase by an average of 3.2 percent in 2024 and 3 percent in 2025, a rise of two percentage points on the 1.2 percent rise for 2024 it expected when it made its last forecast in December.

This is due to the continued strong labour market, which has seen rising incomes and wage increases in Denmark as a result of new collective agreements, at the same time as Denmarks Nationalbank is expected to cut interest rates.

This rise follows two consecutive years of falling real house prices in 2022 and 2023.

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