23 June 2021
The reopening of the Danish economy is in full swing. Many restrictions have been lifted, and the number of people hospitalised with coronavirus has dropped sharply. Overall activity has all more or less recovered to pre-pandemic levels, and the Danish economy is supported by a strong expansion in private demand.
This is the conclusion drawn by Danmarks Nationalbank in a projection for the Danish economy, in which the gross domestic product (GDP) is forecast to increase by 3.3 per cent. In 2022 and 2023, GDP is expected to grow by 3.7 per cent and 2.2 per cent, respectively, bringing the Danish economy into a moderate boom. Growth for the remainder of 2021 and 2022 is expected to be driven by private consumption, supported by high savings. Exports will also expand further, boosted by fast export market recovery.
"Danish economic policy has been instrumental in keeping companies and households afloat during the lockdowns. Activity has recovered quickly following the reopening, and demand is strong. At the same time, there are signs of bottlenecks building up in manufacturing and construction. It is time to adjust the extraordinary fiscal support to the economy and, with the economy heading for a mild boom, the government should be prepared to tighten fiscal policy more than planned," says Governor Lars Rohde.
House prices have been surging since summer 2020, underpinned by rising incomes during the pandemic, for instance due to relief packages. At the same time, interest rates have been low, but price increases have been higher than warranted by income and interest rate developments.
"Amortisation requirements for the most indebted homeowners and a reduction of the interest deduction will reduce vulnerability to large housing market fluctuations and prevent unsustainable risk building. This will strengthen the resilience of the Danish economy. Now is a good time to introduce such structural measures," says Lars Rohde.
Enquiries can be directed to press advisor Ole Mikkelsen on tel. +45 3363 6027.