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Investment Research — General Market Conditions
9 March 2015
Economic Fact Book: Denmark
Denmark is a small open economy and the Danish business cycle tracks the euro
area. Denmark was hit hard by the financial crisis due to the combination of the global
recession and the Danish housing market bubble bursting. GDP fell by 5.1% from 2008 to
2009. The housing market bubble bursting is key to explaining why private consumption
has been more or less constant since 2009.
The Danish economy is currently recovering but the recovery is weak and fragile.
Denmark has now enjoyed positive GDP growth for six consecutive quarters. Last year
was the first full year of positive economic growth since 2011. Employment has picked
up and the number of employed persons in Q4 14 was 31,800 higher than the latest trough
in Q1 13. Also, the housing market is recovering but the recovery is concentrated mainly
in the Copenhagen area. We expect GDP to increase by 1.6% in 2015, rising to 2.0% in
2016, supported mainly by the low oil price.
Recently, Denmark has received substantial attention due to the appreciation
pressure on the Danish krone. Denmark has had a very tight fixed exchange rate
system since 1982 (first against the Deutschmark and since 1999 against the euro)
and the peg is a key element of economic policy in Denmark. The Danish central bank
has countered the recent appreciation pressure by multiple rate cuts and FX intervention.
Denmark will not leave the peg as the peg is a political decision that enjoys full
support across the political parties. See also Research Denmark: The Danish peg is
indisputable, 16 January. The Danish central bank will continue to use its conventional
measures (rate cuts and intervention purchases) in order to counter the appreciation
pressure going forward. The Danish central bank has expressed that it will do ‘whatever it
takes’, which includes introducing new unconventional measures if necessary.
Denmark has had a surplus on its current account balance every year but one since 1990
(except 1998), implying that it now has positive net foreign assets. In 2014, the current
account surplus was very large (6.2% of GDP), reflecting high domestic savings despite
the large gross debt of households. The Danish household debt situation attracts
attention from time to time but the significant gross debt is financed domestically, as
the debt accumulation is largely a consequence of significant gross pension savings
combined with a low cost and flexible mortgage system. See also Research Denmark:
Danish households are resilient, 14 November 2014.
Public finances are sound and both the government deficit and government debt meet
the criteria of the Stability and Growth Pact. Denmark is one of few that enjoys triple-A
ratings across the three major rating agencies. Government bond yield spreads to
Germany are negative. The next general election must be held no later than September
this year.
Key facts on Denmark
 Population: 5.6m (2013).
 GDP per capita: DKK336,100
(EUR 45,100).
 Government type: constitutional
monarchy.
 Fixed exchange rate regi: vis-a-vis
euro.
 Queen: Margrethe II.
 Minority coalition led by the Social
Democrats (S) and the Social
Liberal Party (R).
 Prime Minister: Helle Thorning
Schmidt (Social Democrats).
 Next elections: September 2015,
at the latest.
 Central Bank Governor: Lars
Rohde.
Economic characteristics

Large public sector.

Low private consumption

High level of household debts.

Low unemployment.

Demographic challenges due to
dependency.
See the following pages for illustrative charts and tables.
Analyst
Mikael Olai Milhøj
+45 45 12 76 07
[email protected]
Important disclosures and certifications are contained from page 8 of this report.
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Economic Fact Book: Denmark
Key macroeconomic indicators
Outlook for key economic variables
Denmark - Outlook for key economic variables
GDP (1)
Denmark
CPI (1)
Unemployment (2)
2015 2016 2015 2016
Govt. Budget (3)
Govt. Debt (3)
2015
2016
2015
2016
2015
2016
Danske Bank
1.6
2.0
0.6
1.5
4.9
4.7
-2.4
-2.4
42.5
43.0
IMF
1.8
1.9
1.6
1.8
6.6
6.2
-3.0
-2.3
46.6
47.3
OECD
1.4
1.8
0.7
1.2
6.3
6.1
-2.2
-2.3
48.7
50.7
EU (Commission)
1.7
2.1
0.4
1.6
6.5
6.4
-2.8
-2.7
42.7
43.6
1)%
%y/y
y/y. 2) % of labour force (Danske Bank is forecasting the gross unemployment rate). 3) % of GDP.
1.
2. % of labour force (Danske Bank Markets forecasts the gross unemployment rate)
3. % of GDP
Source: OECD (November), IMF (October) EU (February), Danske Bank (January)
Denmark vs the euro area (EMU)
When
Denmark versus the euro area (EMU)
Denmark EMU
0.3
GDP per capita (5)
When
Denmark
EMU
2013
45,100
29,500
2.5%
-
GDP(1)
Q4-14
0.4
Gov. consumption (2)
2014
26.4
21.0 Economic size relative to EMU (4)
Private cons (2)
Q4-14
48.4
55.9 Inflation - HICP (7)
Jan-15
-0.3
-0.6
Investments (2)
Q4-14
18.9
19.5 Public budget (2) EC fcst
2015
-2.8
-2.2
Exports (2)
Q4-14
53.6
44.8 Public debt (2) EC fcst
2015
42.7
94.4
Current account (2), (8)
Q3-14
6.5
2.3
Jan-15
0.63
1.14
Unemployment (3)
Dec-14
6.4
11.3
Households' financial liabilities (2)
2013
140
67
Long-term interest rates
Sovereign ratings
S&P
AAA / stable
Moody's
Aaa / stable
Fitch
AAA / stable
Sovereign bond yields
2Y yield (6)
-0.15
10Y yield (6)
0.48
1: %
% q/q
q/q, 2: Pct of GDP , 3: % of labour force (LFS definition), 4: based on nominal GDP, 5: EUR per capita, 6: %, 3M av, 7: % y/y , 8: 4Q average
1.
2. % of GDP
3. % of labour force (LFS definition
4. Based on nominal GDP
5. EUR per capita
6. %, 3M average
7. % y/y
8. 4Q average
Source: Eurostat, Statistics Denmark, ECB, Danmarks Nationalbank, Macrobond Financial, Danske Bank Markets
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Economic Fact Book: Denmark
Public finances
Government budget deficit within the 3% limit
Government debt below the 60% limit
Source: European Economic Forecasts (EU forecasts)
Source: European Economic Forecasts (EU forecasts)
Government bond yields close to or below zero
Yield spreads to Germany close to or below zero
Source: Macrobond Financial
Source: Macrobond Financial
Monetary policy
Record-low policy rates
Danish policy rates shadow ECB’s policy rates
Source: Danmarks Nationalbank
Source: Danmarks Nationalbank and ECB
Large increase in the FX reserves
Danmarks Nationalbank intervened for DKK168.7bn in
February
Source: Statistics Denmark, Danmarks Nationalbank
Source: Danmarks Nationalbank
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Economic Fact Book: Denmark
Official band +/- 2.25% around 7.46038
De facto trading range is narrower
Source: Danmarks Nationalbank
Source: Danmarks Nationalbank
Large increase in the banks’ net position with Danmarks
Nationalbank in recent months
FX reserves account for most of the central bank’s assets
Source: Danmarks Nationalbank
Source: Danmarks Nationalbank
National accounts
Denmark has not recovered from the crisis yet
Large output gap
Source: Eurostat, Statistics Denmark, Danske Bank Markets
Source: Danish Economic Council
Private consumption has begun to increase slightly
Gross fixed capital formation still way below pre-crisis level
Source: Eurostat, Statistics Denmark and Danske Bank
Source: Eurostat, Statistics Denmark and Danske Bank
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Economic Fact Book: Denmark
Denmark is a very open economy
Danish business cycle tracks the euro area
Source: Eurostat, Statistics Denmark, Danske Bank Markets
Source: Eurostat, Statistics Denmark, Danske Bank Markets
Foreign trade
Very large current account surplus – helps to explain the
upward pressure on the Danish krone
Denmark has positive net foreign assets
Source: Eurostat, Statistics Denmark, Danske Bank Markets
Source: Statistics Denmark, Danmarks Nationalbank, Danske Bank Markets
Denmark is more export-oriented than most European
countries
Denmark exports mainly to neighbouring countries –
increasing exports to China
Source: Eurostat, Statistics Denmark, Danske Bank Markets
Source: Statistics Denmark, Danske Bank Markets
Large fall in the effective exchange rate due to the ECB’s QEannouncement
Industrial production remains sluggish
Source: Danmarks Nationalbank
Source: Eurostat, Statistics Denmark, Danske Bank Markets
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Economic Fact Book: Denmark
Survey indicators
The economic outlook is better than suggested by the
business confidence indicator
Consumer confidence back at pre-crisis level
Source: EU
Source: EU
Inflation and wages
Danish inflation follows euro inflation
Positive real wage growth despite moderate nominal wage
growth
Source: Eurostat, Statistics Denmark
Source: Statistics Denmark, Danske Bank Markets
Labour market and demographics
Low unemployment rate compared with the euro area
Increasing employment
Source: Eurostat
Source: Eurostat
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Economic Fact Book: Denmark
Denmark lost competitiveness during the 2000s due to
increasing labour costs
Stable work force in the future
Source: Eurostat
Source: Statistics Denmark, Danske Bank Markets
Housing market and construction
The Danish housing market is recovering slowly
Large regional differences in the Danish housing market
Source: ECB, Statistics Denmark, Danske Bank Markets
Source: Statistics Denmark, Danske Bank Markets
Danish households’ gross debt is one of the highest in the
world
Danish households’ have positive net assets
Source: Eurostat
Source: Statistics Denmark, Danske Bank Markets
No growth in loans to households
Interest-only, variable-rate mortgage loans have become the
most popular loan type
Source: Danmarks Nationalbank
Source: Danmarks Nationalbank
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Economic Fact Book: Denmark
Disclosures
This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S (‘Danske
Bank’). The author of this research report is Mikael Olai Milhøj, Analyst.
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Economic Fact Book: Denmark
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