2022-02-17-牛津经济研究院-Denmark_High_inflation_becomes_main_downside_risk_to_our_2022_outlook_1页_68kb

Denmark Economic Forecast Summary

Core Content

This document provides an economic forecast for Denmark, highlighting key trends and projections for GDP growth, inflation, and other macroeconomic indicators from 2019 to 2024. It outlines the impact of the Omicron variant, energy price surges, and the EU Recovery Fund on the economy, while also addressing labor market dynamics and monetary policy.

Main Views

• GDP Growth:

  • The 2022 GDP growth forecast was raised by 0.4 percentage points to 3.4%, following a 1.1% quarterly growth in Q4 2021.
  • In 2023, growth is expected to slow to 2.1%, and in 2024, to 1.9%.

• Inflation:

  • Inflation is forecasted to average 2.6% in 2022, up from the previous estimate due to the delayed pass-through of high energy prices.
  • In January 2022, inflation reached 4.3% y/y, the highest in nearly 14 years, driven by soaring electricity bills.
  • Inflation is expected to decline to 1.1% in 2023 and 1.2% in 2024.

• Consumption:

  • Private consumption was affected by high Covid cases during the winter but is expected to recover as restrictions are lifted.
  • In 2022, private consumption is projected to grow at 3.9%, and in 2023 at 1.4%.

• Investment:

  • Fixed investment is expected to grow at 2.4% in 2022 and 1.7% in 2023.
  • Investments related to the EU Recovery Fund, particularly in green energy and digitalisation, will provide a boost to the economy.

• Exports and Imports:

  • Exports of goods and services are forecasted to grow at 6.1% in 2022 and 5.2% in 2023.
  • Imports are expected to grow at 5.4% in 2022 and 3.7% in 2023.

• Labour Market:

  • Labour market stress remains high, but survey data suggests that labour shortages have likely peaked.
  • The unemployment rate is expected to end 2022 at 3.4%, up from 2.7% at the end of 2021.

• Government Spending:

  • Government consumption is projected to grow at 1.4% in 2022 and 2.0% in 2023.
  • The government budget is expected to improve, with a 0.8% deficit in 2022 and a 0.1% deficit in 2023.

• Interest Rates:

  • Short-term interest rates are expected to remain negative, at -0.27% in 2022 and -0.27% in 2023.
  • Long-term interest rates are projected to rise, reaching 0.35% in 2022, 0.67% in 2023, and 0.91% in 2024.

• Exchange Rates:

  • The exchange rate (vs US$) is expected to average 6.47 in 2022 and 6.26 in 2023.
  • The exchange rate (per Euro) is forecasted to remain stable at 7.45 throughout the forecast period.

Key Information

• Growth Drivers:

  • The positive carryover effect from Q4 2021's GDP growth.
  • Strong consumer spending and EU Recovery Fund investments.
  • Tourist arrivals and private investment are expected to boost growth in 2022.

• Downside Risks:

  • Ongoing energy price surges and their impact on inflationary pressures.
  • High inflation in H1 2022, which may constrain consumer spending.

• Policy Outlook:

  • The central bank is likely to maintain low interest rates to support economic growth.
  • Government spending is expected to remain a key component of economic activity, with a narrowing budget deficit.

• Overall Outlook:

  • The Danish economy is expected to experience moderate growth in 2022 and slower growth in 2023 and 2024.
  • Inflation is expected to peak in 2022 and gradually decline thereafter.
  • The labor market is expected to improve, with unemployment decreasing to 3.4% by the end of 2022.