14 March 2018
The upswing continued in the 2nd half of 2017 and the Danish economy has now entered a boom phase. Labour market pressures have increased, but so far the upswing has been balanced.
That is Danmarks Nationalbank's conclusion in a new projection of the Danish economy, in which growth in the gross domestic product, GDP, is expected to be 1.9 per cent this year, 1.8 per cent next year and 1.7 per cent in 2020.
"The Danish economy is booming and we need to make sure it remains healthy. In good times, economic policy should be prudent so that we can build up buffers to cushion the effect of a subsequent downturn. After all, the boom will not continue forever," says Governor Lars Rohde, Danmarks Nationalbank.
The primary scenario in Danmarks Nationalbank's projection is a moderate boom, but stronger developments could also be seen. Savings are high among both households and firms and this may be converted into higher consumption and investment appetite when the economy is expanding. Demand in Denmark's export markets may also increase.
"We must avoid a situation where the boom leads to overheating followed by a downturn (a boom-bust cycle). So the government should be prepared to introduce preventive fiscal tightening at short notice if there are signs that the economy is overheating," says Lars Rohde.
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