17 March 2021
A gradual reopening of society has commenced, but large parts of the Danish economy remain hampered by restrictions. The population's opportunities for purchasing services such as restaurant visits are limited by the restrictions. There is a sound basis for a rapid economic recovery. The vaccination of the population, large savings, the disbursement of holiday allowance and accumulated demand provide fertile ground for a sharp increase in activity when the economy is less restricted by restrictions.
This is the conclusion drawn by Danmarks Nationalbank in its latest projection for the Danish economy, where the gross domestic product (GDP) is projected to increase by 1.4 per cent this year. The growth rate is kept down by the very low activity level in the 1st quarter. Economic activity is expected to pick up sharply during the year in line with the population being vaccinated and the expected easing of restrictions. GDP is projected to increase by 4.5 per cent and 2.2 per cent, respectively, in 2022 and 2023.
"There's still great uncertainty about the economic development, which may be significantly stronger or weaker than in our projection. It may therefore become necessary to tighten or ease the planned fiscal policy once the restrictions are lifted. And it's important to be prepared for both scenarios," says Lars Rohde, Governor of Danmarks Nationalbank.
The restrictions have resulted in a multiple-speed economy. The limited opportunities for, for example, shopping, café and restaurant visits and tourism have hit these industries hard. In other parts of the economy, however, activity has returned to or is even higher than the pre-pandemic level. This applies to, for example, supermarkets, housing markets and construction, which are experiencing high demand.
"Broad fiscal policy stimulus is inexpedient while there are restrictions. It puts further pressure on sectors where activity is already high. For example, the construction sector is beginning to show signs of labour shortage. That is why the Housing Job Scheme is not appropriate in the current situation either," says Lars Rohde.
Enquiries can be directed to press advisor Ole Mikkelsen on tel. +45 3363 6027.