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Corporate Saving and Investment - Part 2

The net lending of Danish firms is currently very high. 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. An econometric analysis shows that the current investment ratio in Denmark is somewhat below its long-term level, while this is not the case for the other countries overall. An analysis of accounting data at firm level shows that medium-sized firms, in particular, have reduced their investment spending, and that this applies especially to real-estate firms and trading and transport firms.