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Denmark ‘finds’ extra 52 billion kroner in state funds

The Danish state raised 128.7 billion kroner in 2022, some 52.4 billion kroner more than the country’s finance ministry expected in calculations made last summer.

Published: 5 January 2023 17:23 CET

Denmark 'finds' extra 52 billion kroner in state funds

Denmark's national finances are in a better position than they were expected to be at the end of 2022. Photo: Kristian Djurhuus/Ritzau Scanpix

New data reported by news wire Ritzau shows that Denmark’s state coffers are over 52 billion kroner healthier than the Ministry of Finance said in August they expected by the end of 2022.

The 2022 result is a huge win for public finances and shows that the country’s economy is faring better than previously thought, senior economist Las Olsen of Danske Bank said.

“2022 was a high with high growth after corona. That tells us more than anything something about why public finances are so strong,” he said.

Another explanation for the figure is the boost given to tax revenues by high growth, he said.

A similar situation occurred in 2021, Ritzau writes. A year ago, an “extra” 33.3 billion kroner was present in state finances in comparison to government expectations.

“We have seen time and again that public finances have been markedly better than expected and that is characterised by many things but not least that revenues keep on positively surprising us,” he said.

READ ALSO: Denmark reduces national debt by 25 percent since 2021

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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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