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Economy and Finance

Economic forecast for Denmark

The latest macroeconomic forecast for Denmark. 

Denmark ended 2021 with strong growth dynamics, based on sound domestic demand, compounded by some additional growth contributions from net exports. However, in early 2022 these growth developments took a slight setback with negative quarter on quarter growth in 2022Q1. Most notably, consumption fell compared with the previous quarter in a context of ongoing COVID-19-related restrictions. The war in Ukraine further challenges the growth outlook as it adds to supply disruptions and high energy prices while contributing to tightening financial market conditions. However, most indicators suggest continued positive underlying growth dynamics. Financially sound households, positive labour market developments reflected by historically low unemployment and the number of published job vacancies and good profitability testify to strong fundamentals. Overall, real GDP is forecast to grow by 3.0% in 2022, mainly driven by domestic demand (both private consumption and investment) and with a minor positive contribution from net exports. 

Last update : Summer 2022 Economic Forecast (14/07/2022)

Indicators2020202120222023
GDP growth (%, yoy)-2,04,93,01,2
Inflation (%, yoy)0,31,97,53,4

It is expected that the negative consequences of the war in Ukraine will continue to imply rather low growth dynamics in 2023. Despite sound underlying economic fundamentals higher interest rates, higher energy prices and a weaker external growth outlook are expected to dampen growth, and lead to a marked deceleration in 2023. For 2023, real GDP is projected to grow at 1.2%. 

Consumer price inflation (HICP) has been on a strong upward trend since early 2021 and has accelerated further in the first half of 2022. While higher energy and food prices lifted inflation first, core inflation is also contributing to these inflationary pressures. All other things equal, Denmark’s currency peg implies inflation expectations close to those of the euro area. The war in Ukraine, uncertainty about raw materials and internationally observed supply disruptions are projected to result in a very strong surge in HICP inflation to an annual rate of 7.5% in 2022. Under the assumption of some levelling-off of energy prices, a deceleration of inflationary pressures is expected in 2023. HICP inflation is projected to reach 3.4% next year. Second round effects present an upside risk to the inflationary outlook, in particular rising labour market pressures in the context of collective wage bargaining in a tight labour market which could fuel higher than expected wage growth.