Real GDP growth in Denmark will continue to be driven by domestic consumption, which will offset external headwinds to a large degree. However, the large debt burden of the private sector will restrain growth over a multi-year horizon.
We retain the view that the government will remain unstable. The one-party Liberal minority government will have a difficult time passing legislation, making it likely that the government will be ousted before its term ends in 2019.
There is a high probability that Denmark will seek a renegotiation with the European Union over its terms of membership in the bloc following the UK's vote in June 2016 to leave the union. In any event, eurosceptic parties will continue to press for reform, increasing political instability.
Major Forecast Changes
We have downgraded our 2016 real GDP growth forecast to 0.8% from 1.0% previously, and 2017 to 1.0% from 1.2% previously. This is on account of external factors dampening economic activity in Denmark between now and 2018, including the impact of 'Brexit'.
We now see central bank policy interest rate hikes beginning in 2020, a year later than we had previously expected.
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||1.0||0.8||1.0|
|Nominal GDP, EURbn||260.6||234.9||271.7||278.6|
|Consumer price inflation, % y-o-y, eop||0.1||0.5||1.2||1.3|
|Exchange rate DKK/USD, eop||5.61||6.71||6.96||6.77|
|Budget balance, % of GDP||1.2||-2.1||-2.8||-2.5|
|Current account balance, % of GDP||6.2||6.8||6.5||6.3|
Assess your risk exposure in Denmark with our 100% independent forecasts assessing the pace and stability of this key market. Backed by trusted data from BMI Research's 52 million data point economic forecast model, this report will allow you to measure political, economic, business environment and operational risks in Denmark with confidence.
Your subscription service includes:
- Delivery of the report in print and PDF
- Online access for 12 months
- The functionality to translate your online report into your choice of 10 languages - Arabic, Chinese, French, German, Italian, Japanese, Korean, Portuguese, Russian and Spanish
- The ability to export data and graphs from the online report directly into your workflow
- The support of a dedicated Account Manager to answer any questions you might have about your subscription
- Access to our team of leading analysts who will be happy to answer any questions you might have about the data and forecasts included in this report