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Denmark After slowing to 0.7% in 2023, economic growth is projected to recover to 1.4% in 2024. A strong labour market and large excess savings will support private consumption. By contrast, increasing borrowing costs and high uncertainty will weigh on housing and business investment. Inflation will recede from 4.9% in 2023 to 3.2% in 2024 on the back of falling commodity prices. The main risks to the outlook include stronger price and wage growth than projected. By contrast, a steeper fall in house prices would negatively affect economic activity. Raising interest rates in line with the euro area to support the currency peg will help to stabilise inflation by dampening domestic demand. Fiscal policy will remain prudent with government budget surpluses in 2023 and 2024. Nevertheless, if inflationary pressures turn out stronger than expected, some fiscal tightening would be required next year. Structural policies facilitating international recruitment and reducing effective labour taxation would help to support labour supply. Moving ahead with plans to strengthen emissions pricing and accelerating the implementation of infrastructure projects would help to sustain investment and the green transition. Growth momentum has weakened The economy has slowed since the second half of 2022, except in the buoyant pharmaceutical sector. GDP growth slowed to 0.2% in the first quarter of 2023. Industrial production has weakened since the beginning of this year. The energy price shock, increasing borrowing costs, and low confidence have hit private consumption and housing investment. Rising interest rates have slowed transactions in the housing market and house prices have fallen by around 8% from their peak in mid-2022. Tensions in the labour market have started to ease, with growing unemployment and contained wage growth, but recruitment difficulties have remained pronounced. Headline inflation declined to 5.3% in April amid falling energy prices. Core inflation remains high, reflecting the progressive pass-through of higher production costs to consumer prices.
Denmark
Source: OECD Economic Outlook 113 database. StatLink 2 https://stat.link/co5ql4
OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 1: PRELIMINARY VERSION © OECD 2023