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Diffusion of new knowledge benefits firms' productivity

Productivity growth in the Danish economy since 1995 has been lower than previously. This reflects weak productivity growth in services, while manufacturing has maintained its strong momentum. The decline in productivity growth is an international trend. Growth in aggregate productivity is broad-based in Denmark. It is not only driven by a small group of high-productivity firms. This indicates diffusion of knowledge and technological advances. Productivity levels vary considerably across firms within the same industry.


The Faroese economy – Boom and labour market pressure

The Faroese economy is booming. Unemployment is low, and the construction sector, in particular, is reporting labour shortages. As in earlier boom periods, Faroese fiscal policy seems to be procyclical, with a resultant risk that the economy will overheat. The Faroese government should tighten the fiscal policy, and with the economy in good shape, now is a good time to address the long-term challenges of public finances.


Outlook for the Danish economy – Solid upswing with increased labour market pressure

The ongoing upswing in the Danish economy is solid, and the labour market pressure has increased. Growth in GDP is projected to rise to 2.3 per cent this year from 1.7 per cent last year, and the Danish economy will be in a boom in the coming years. So far, the upswing has been balanced. There is room for higher pressure on the economy during the boom, but overheating may occur suddenly and vigorously. The government should be prepared to initiate a fiscal tightening with a view to dampening growth in demand.


Once again labour shortage in construction

The share of construction firms reporting labour shortage has almost reached the level in the mid-00s. Experience testifies to labour shortage affecting all types of construction firms when labour market pressures are high. Further stimulation of demand for construction services would not be advantageous in the current cyclical position.


Housing taxation agreement stabilises house prices

The effects on house prices of the Housing Tax Agreement are analyzed. From 2021, housing taxes will again dampen fluctuations in house prices and thus economic cycles in general. Towards 2021, the agreement stimulates real estate prices outside the big cities, while lowering prices, e.g. on apartments in Copenhagen. Finally, it is shown that for most home buyers there is no financial incentive to advance home purchases to before 2021 just to ensure a tax reliefe.


Greenland Challenged Despite Strong Fisheries

Strong economic growth in Greenland in 2016 and 2017 is to a large extent attributable to fisheries. Rising building and construction investments have also boosted growth in Greenland's economy. Despite the good times, the Greenlandic politicians need to address a number of major challenges. It is difficult to combine a sound economy with independence.


Danish Government Debt Management Policy - Strategy announcement 2nd half of 2017

The target for issuance of domestic government bonds in 2017 is maintained at kr. 65 billion in order to increase the outstanding volume of new bonds and ensure continuity in issuance policy. The target for T-bills at year-end is also maintained unchanged at kr. 30 billion.


Optimism in the banking sector provides breeding ground for increased risk-taking

Danmarks Nationalbank's semiannual analysis of financial stability shows that the largest banking groups achieved their best ever overall performance in 2016 and the banks' financial statements for the 1st quarter of 2017 also recorded sound profits. The banks' earnings are underpinned by temporary effects from very low loan impairment charges. The economic upswing, rising house prices and the continued low level of interest rates may lead to a general perception of low credit risk. This may intensify the pressure on the banks' credit standards. The large banks comply with the current capital requirements, but their capital base is lower than that of other Nordic banks. Results from Danmarks Nationalbank's accounts-based stress test show that, in a severe recession scenario, few of the systemic banks will have a small capital shortfall relative to the buffer requirements.


Largest banks close to buffer requirements in stress test

Danmarks Nationalbank's semiannual stress test of the Danish banking sector shows that the largest banks generally have capital in excess of the regulatory requirements in a severe recession scenario. However, some banks are close to drawing on their capital buffers, and a few tap into their buffers.


Banks' capital accumulation does not hurt GDP growth

The capital ratios of Danish banks have increased in the years following the financial crisis. There are no adverse effects on GDP growth of banks' capital accumulation. This is the conclusion of Danmarks Nationalbank's analysis of banks' capital accumulation and GDP growth.


New Model has improved Liquidity in the Danish Government Securities Market

New primary dealer model is off to a good start with an improvement in liquidity. Price transparency has improved with narrower bid-ask spreads and increasing turnover in the interdealer market. All 11 primary dealers in Danish government bonds have quoted substantially tighter prices and the turnover is to a lesser degree than before concentrated on a few banks.


Denmark contributes to a strong IMF

The main objective of the International Monetary Fund, IMF, is to promote global economic and financial stability. A well-functioning IMF with sufficient funding is a prerequisite for solving this task. A strong IMF is a matter of Danish interest, as Denmark is a small, open economy and therefore highly dependent on and exposed to external conditions. Over the last decade Denmark, via Danmarks Nationalbank, has increased its total commitments to the IMF. Risks associated with loans to the IMF are extremely low due the high creditworthiness of the IMF.


Danes are Front-Runners in Electronic Payments

Danes prefer electronic payments, especially payment cards. In fact they use cards more than any other EU citizens. The electronic payments are supported by the payments systems which ensure that the payments are settled quickly and smoothly. E.g. it is possible to transfer funds in seconds. Denmark is a digital front-runner according to the European Commission's index. This is among other factors attributable to the targeted public-sector focus on digitisation.


Outlook for the Danish economy – Balanced recovery in the Danish economy

The Danish economy is in a balanced upswing and heading towards a moderate boom. Structural factors may dampen stronger dynamics and thus the growth outlook is more limited than previously. The growth in GDP is expected to increase to 1.6 per cent in 2017 from 1.1 per cent in 2016. The growth scenario in Danmarks Nationalbank's forecast assumes that labour supply will increase as a result of reforms already implemented. The growth scenario can be affected by a build-up of strong labour market pressure and the economy abroad including the US fiscal policy.


Higher Growth Figures Confirmed the Upswing

Statistics Denmark’s revised GDP figures published last autumn provide a more complete picture of the Danish economy as being in an upswing since 2012. However, the new figures do not change Danmarks Nationalbank’s assessment of the state of the Danish economy to any significant extent. Danmarks Nationalbank’s forecasts of GDP growth after the 2008-09 downturn was accurate. The GDP revision emphasises that assessments of current developments in the Danish economy cannot be based merely on GDP.


Cyber resilience in the financial sector

The core financial sector participants in Denmark have strong focus on cyber security, but there is room for improvement. That is the main conclusion of Danmarks Nationalbank's and the Danish Financial Supervisory Authority's questionnaire survey.


Enhanced Requirements and Payments are to strengthen the Danish Government Securities Market

From 1 April 2017, the central government is introducing payments to banks that quote prices on a current basis and act as distribution channels for Danish government bonds, i.e. function as primary dealers. Total payments will amount to a maximum of kr. 25 million p.a. The banks making the greatest efforts will receive the largest payments. At the same time, the requirements for primary dealers will be enhanced.


Too-big-to-fail can be solved inexpensively

Danmarks Nationalbank’s calculations show that the price of solving the too-big-to-fail issue for the Danish mortgage banks is low. Introduction of a minimum requirement for own funds and eligible liabilities, MREL, corresponding to 8 per cent of the mortgage banks’ total liabilities and own funds would justify an increase of administration margins by between 0.02 and 0.11 percentage point. An MREL would allow the mortgage banks to write down up to 8 per cent of their liabilities and own funds. Hence, the Resolution Fund can be used in the event of very large losses.


Danish Government Debt Policy - Strategy 2017

The target for sales of government bonds and T-bills in 2017 is kr. 65 billion and kr. 30 billion, respectively, which is unchanged from 2016. The central government's issuance in 2017 will predominantly be in 2-year and 10-year nominal securities. The government debt policy is still focused on supporting liquidity by being active in the secondary market.