Real GDP growth in Denmark will continue to be supported by a steady improvement in external demand, mainly from the eurozone. However, the large debt burden of the private sector will restrain growth over a multi-year horizon.
While Prime Minister Lars Lokke Rasmussen's hardline nationalist stance towards Europe's migration crisis has bolstered public support for the conservative right on Denmark's political scene, we retain the view that the government will remain unstable. The one-party minority government will have a difficult time passing legislation, making it likely that the government will be ousted before its term ends in 2019.
Major Forecast Changes
Taking into account the 0.4% q-o-q real GDP contraction in Q315, combined with inventory buildup in the quarter that is likely to reverse in Q415 and Q116 (without inventories, the contraction would have been 0.6pp greater), we have revised down our 2016 real GDP growth forecast to 1.2% from 1.7%.
The main risk to the Danish economy remains the extremely high levels of household indebtedness. Ultra-low interest rates are underpinning a slow deleveraging process, and as such the economy's vulnerability to rate hikes remains a concern. While we anticipate interest rates to remain very low for several years, any unexpected growth slowdown or interest rate shock would leave the economy vulnerable.
|f=BMI forecast. Source: National Sources/BMI|
|Real GDP growth, % y-o-y||1.3||1.3||1.2||1.4|
|Nominal GDP, EURbn||260.6||233.7||270.4||277.8|
|Consumer price inflation, % y-o-y, eop||0.1||0.5||1.0||1.3|
|Exchange rate DKK/USD, eop||6.15||8.04||6.77||6.48|
|Budget balance, % of GDP||1.2||-2.1||-2.7||-2.4|
|Current account balance, % of GDP||6.2||6.0||5.7||5.5|
The Denmark Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Denmark. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.
An influential new analysis of Denmark's economic, political and financial prospects through end-2019, just published by award-winning forecasters, BMI Research.
- Forecast the pace and stability of Denmark's economic and industry growth through end-2019.
- Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
- Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
- Contextualise Denmark's country risks against regional peers using BMI's country comparative Risk Index system.
- Evaluate external threats to doing business in Denmark, including currency volatility, the commodity price boom and protectionist policies.
BMI provides our fully independent 5-year forecasts for Denmark through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.
Economic Outlook Contents
The Denmark Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.
Key Areas Covered:
- Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
- BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.
- Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
- Balance of Payments - trade and investment, current and capital account.
- Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
- Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
- Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
- Foreign Direct Investment - approvals, inflows and climate.
- External Debt - debt profile (short and long-term plus public and private sector obligations).
- Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.
- Rely upon BMI's 100% independent forecast scenarios for Denmark and underlying assumptions - we take no advertising and are privately-owned.
- Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Denmark, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
- Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.
What are the political risks to doing business in Denmark over the next 5-years?
BMI's Denmark country Risk Index evaluates the short- and medium-term threats to political stability.
Political Outlook Contents
- SWOT Analysis for the Denmark Market - Political Strengths, Weaknesses, Opportunities and Threats facing Denmark.
- Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for Denmark's risk are compared with regional and global averages.
- Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
- Long-Term Political Outlook BMI examines the structural risks to the stability of Denmark’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.
- Benchmark Denmark's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
- Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
- Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.
Key Sector Outlook*
Which industry sectors in Denmark will grow fastest, and where are the major investment opportunities in the market?
BMI identifies investment opportunities in Denmark's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.
Key Areas Covered:
- Market Overview - Size and value of each industry, including recent sector developments and major industry key performance indicators (KPIs) that have impacted company performance.
- 5-year Industry Forecasts - Forecasts for each year over 2015-2019, using BMI's proprietary industry modelling technique, which incorporates key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across and within each industry.
- Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.
- Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
- Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.