20 March 2024
Inflation has fallen sharply over the past year and a half, partly due to a large fall in energy prices. But wage increases are the highest seen in many years, which continues to push up prices.
"Inflation is on track, but we can't relax just yet. There is still some inflationary pressure coming from higher wages. This is especially true in the service industries because they are relatively labour-intensive," says Governor Christian Kettel Thomsen.
Therefore, there is still a need for economic policy, i.e. monetary and fiscal policy, to keep inflation down.
"We believe that monetary policy, through higher interest rates, is dampening economic activity enough to keep inflation down. Therefore, we believe that the government's planned fiscal policy is appropriately aligned with the economic situation," says Governor Christian Kettel Thomsen.
Over the past two years, the Danish economy has grown in two speeds. On the one hand, growth in most parts of the Danish economy has slowed down like in the international economy. On the other hand, there has been strong growth in the pharmaceutical industry, where a significant part of the production takes place abroad but is included in Danish value added.
Danmarks Nationalbank projects that growth in the Danish economy will pick up slightly as export markets improve and households in Denmark regain purchasing power. But growth will still be subdued. Over the next few years, a slight decrease in employment and a slight increase in unemployment are expected.
"The relatively high growth projection of 2.4 per cent this year is partly due to the development of Danish production abroad and the reopening of the Tyra field. Without these two factors, we estimate that the Danish economy will grow at a more subdued rate of 0.8 per cent this year," says Governor Christian Kettel Thomsen.
Danmarks Nationalbank's expectations in a new projection:
Denmark's gross domestic product, GDP, is expected to increase 2.4 per cent in 2024, 1.4 per cent in 2025 and 1.3 per cent in 2026.
Inflation (HICP annual) is expected to be 2.2 per cent in 2024, 2.6 per cent in 2025 and 1.7 per cent in 2026.
Core inflation (i.e. inflation excluding energy and unprocessed food) is expected to be 2.3 per cent in 2024, 2.8 per cent in 2025 and 2.0 per cent in 2026
Danmarks Nationalbank's new analyses of the Danish economy can be found on Danmarks Nationalbank's website nationalbanken.dk.
In case of questions, you are welcome to contact Teis Hald Jensen, Communications and Press Officer, on telephone +45 3363 6066 or by email at tehj@nationalbanken.dk.