22 September 2021
The Danish economy is heading back towards a moderate boom after strong growth in the wake of the reopening of the economy in the spring. But the rapid recovery has made it difficult for companies to find the needed labour. On top of this the recovery is also disrupted by capacity problems in several parts of the global supply chains. This means that the further course out of the pandemic may consequently become uneven.
This is Danmarks Nationalbank's conclusion in a new projection for the Danish economy, in which the gross domestic product (GDP) is estimated to increase by 3.8 per cent this year. In 2022 and 2023, GDP is expected to increase by 3.1 per cent and 2.4 per cent, respectively. With the expected growth, the Danish economy will already have returned to a state of a moderate boom next year.
"If the Danish economy continues into the boom in a balanced way in the coming years, there is no need for a greater tightening of fiscal policy than that proposed by the Government. The Danish economy is fundamentally sound, and competitiveness is good," says Governor Lars Rohde.
However, the way out of a pandemic is untried, and very strong demand may develop into an overheating of the economy.
"The Government should be ready to tighten its fiscal policy to ease capacity pressure in the economy, so that we avoid an abrupt turn of the economic cycle," says Lars Rohde.
On the housing market, this is currently a good time to introduce amortisation requirements for the most indebted homeowners and to reduce the mortgage interest deduction. This can reduce the vulnerability in connection with large housing market fluctuations and prevent unsustainable risk build-up. Together with the new stabilising housing taxation, these measures will strengthen the resilience of the Danish economy.
Enquiries can be directed to press advisor Ole Mikkelsen on tel. +45 3363 6027.