According to Danmarks Nationalbank's projection from the 2nd quarter of 2015, the current upswing will continue, with economic growth of around 2 per cent in the coming years.
The expansion is broad-based, but is expected to be driven mainly by higher exports, private consumption and business investment. The outlook for unemployment and employment also points to an economy that is picking up. The labour market gap, which indicates how much employment can rise without causing inflationary pressures in the economy, is expected to close within the next couple of years. If the upswing is stronger than forecast in the projection, there could soon be an extensive shortage of labour, involving a risk of overheating. Therefore, it is important that the labour market reforms already adopted are not rolled back, and focus is kept on reforms to increase the labour force.
Private sector growth is now so strong that fiscal policy should be tightened, thus bringing the structural budget in balance over the next couple of years. This will reduce the risk of overheating.
In previous upswings, the housing market has been a source of macroeconomic instability and overheating of the economy. Hence, there is a need as quickly as possible to establish a system whereby the value of houses is taxed at a fixed percentage so that the tax payable increases when house prices rise and decreases when house prices fall. That will also contribute to stabilising the upswing.
DANMARKS NATIONALBANK'S PROJECTION
Danmarks Nationalbank forecasts GDP growth at 2.0 per cent in 2015, 2.1 per cent in 2016 and 1.8 per cent in 2017. The forecast is unchanged relative to the March projection. The annual increase in the Harmonised Index of Consumer Prices, HICP, is forecast at 0.5 per cent in 2015, 1.8 per cent in 2016 and 1.9 per cent in 2017. The HICP forecast is also unchanged relative to the March projection.
Enquiries can be directed to Julie Holm Simonsen on tel. +45 3363 6022.