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Corporate Saving and Investment - Part 1

The net lending of Danish firms is currently very high. The underlying reasons are analysed in more detail in part 2 of this Monetary Review. This article summarises the analysis. The reversal in corporate net lending during the economic slowdown was more pronounced than normally warranted by the business cycle. But this cannot be attributed to a larger need for debt reduction than in other countries. Corporate gross savings have risen during the crisis, particularly due to falling interest expenses and dividend payments. Over a number of years, the level of corporate gross savings has been high in Denmark relative to several other OECD countries, particularly as a result of higher property income and lower dividend payments. Another factor explaining the increase in corporate net lending is a stronger decline in investment spending. The investment ratio in Denmark is currently somewhat below its long-term level. Medium-sized firms in particular have reduced their investment spending.