The Danish economy has improved in recent years, with rising activity and employment in the private sector.
"Danmarks Nationalbank expects the moderate upswing to strengthen and gradually become more self-sustained," says Governor Lars Rohde. The foundations are in place in the form of a large private sector savings surplus, very low interest rates, lower energy prices and higher disposable income. The projection also assumes that the international economy improves.
In recent years the government budget deficit has been reduced by temporary revenues, first and foremost from early taxation of capital pensions, as well as extraordinary revenues from taxation of pension yields. That will also be the case in 2015.
"In the long run it is not possible to rely on one-off revenues to keep the deficit within the 3 per cent limit," Lars Rohde emphasises.
Banking union
On 4 November 2014, the ECB took over responsibility for supervision of the largest euro area credit institutions. This means that the banking union is now a reality.
Lars Rohde says: "Danmarks Nationalbank recommends that Denmark joins the banking union in 2015. In our assessment, there are no uncertainties or outstanding issues that justify a postponement of this decision".
Overall, Danmarks Nationalbank finds that participation in the banking union will strengthen financial stability in Denmark and provide a basis for increased competition, to the benefit of Danish households and firms.
Danmarks Nationalbank's projection
Danmarks Nationalbank forecasts GDP growth at 0.8 per cent in 2014, rising to 1.7 per cent in 2015 and 2.0 per cent in 2016. That is unchanged relative to the September projection.
The annual increase in the Harmonised Index of Consumer Prices, HICP, is forecast at 0.3 per cent in 2014, 0.8 per cent in 2015 and 1.7 per cent in 2016. Compared with the September projection, the forecast is 0.1 percentage point lower for 2014, 0.5 percentage point lower for 2015 and 0.1 percentage point lower for 2016.
Enquiries can be directed to Karsten Biltoft on tel. +45 3363 6021.