12 September 2018
The Danish economy is now experiencing one of the longest periods of continuous growth, and it has taken place without considerable imbalances building up. Since the spring of 2013, month after month more people have entered the labour market and unemployment has fallen. This has reinforced labour market pressures. Overall, employment has risen by 200,000 people, helped by previously adopted reforms and an influx of foreign labour.
During 2018, the economy has moved further into the upswing, and this is expected to continue in the coming years, as shown in a new projection from Danmarks Nationalbank. Growth in the gross domestic product, GDP, is expected to be 1.7 per cent in 2018 if a large one-off patent-related payment that increases GDP by 0.4 per cent in 2017 and correspondingly reduces growth in 2018 is excluded. Including this payment growth is 1.3 per cent this year. Growth is expected to be 1.8 and 1.7 per cent, respectively, in 2019 and 2020.
As upswings do not last forever, it is wise to use the good times to prepare for a reversal at some point, Danmarks Nationalbank finds.
"The overall objective of economic policy must be to steer safely through the upswing and contribute to a subsequent soft landing. So the 2019 Finance Act should not stimulate demand further, and if signs of overheating appear, the government should be prepared to tighten fiscal policy," says Governor Lars Rohde.
"Although we are in the middle of an economic boom with positive developments in the labour market, it is worth recalling that every upswing must come to an end. When growth begins to slow down, fiscal policy should not actively try to counteract this," says Lars Rohde.
Enquiries can be directed to Ole Mikkelsen, press consultant, tel. +45 3363 6027.