Danes spend just DKK 96 for every DKK 100 they earn. Modest spending poses a threat to continued growth, says the Confederation of Danish Industry.

04-12-19 DIB News

DI forecast: Consumers must keep Danish economy above water

In 2020 and 2021 the economy will grow by 1.2 and 1.5 per cent respectively - provided that consumers start spending more money and companies increase investments. If not, the economy will start to look significantly weaker.

In 2020 and 2021 the economy will grow by 1.2 and 1.5 per cent respectively - provided that consumers start spending more money and companies increase investments. If not, the economy will start to look significantly weaker.

There are tough times ahead for the Danish economy, and things could get even harder if consumers and companies do not start spending more money. That is the conclusion of a new economic forecast published by the Confederation of Danish Industry (DI) today.

According to the forecast, Denmark’s economy is expected to grow by 1.2 per cent in 2020 and 1.5 per cent in 2021. In contrast, for the past four years the economy has grown by between 2 and 3.2 per cent.

“These past years have really been good for Denmark and the Danes. Companies’ international sales have boomed, more and more jobs have been added and the economy has grown at a pace that many other countries envy,” says Director at DI Kent Damsgaard. He adds:

“However, it looks like the good times will soon be over. The global economy is undergoing a significant slowdown and there is much uncertainty as a result of Brexit and the US-China trade war. 

If Denmark’s economy is to keep up the pace, it will require that consumers start spending more money. Kent Damsgaard, Politisk direktør

Read the full analysis here (in Danish)

See also: Small number of Danish companies account for very large portion of exports

There’s enough money

The good news is that there is also much to suggest that after many years of moderation, Danes are prepared to start spending more money.

Among other things, DI notes that there has been decent increase in Danes’ real income. In addition, low interest rates mean that many Danes have more money to spend after refinancing their mortgages.

Additionally, in coming years around 800,000 homeowners will receive property tax refunds for overpayments made since 2011. The Ministry of Taxation expects that refunds will amount to DKK 14 billion.

“There’s enough money in Danish households to increase spending. This is also reflected in the fact that Danes continue to spend only DKK 96 for every DKK 100 they earn,” says Kent Damsgaard, and adds that we must go all the way back to 2009 to find the last year in which Danes spent more than they earned.

See also: Alarmingly low confidence in European economy

Job growth nearing the end

Meanwhile, the Confederation of Danish Industry is not rock-solid in its belief that consumption will in fact increase in coming months. Among other things, this is because there is significant uncertainty regarding the global economy, which may rub off on consumers’ mood and companies’ desire to invest.

If the portion of income spent on consumption and investment in households and companies remains at its current level, economic growth will be significantly lower, at a rate of 0.7 per cent in 2020 and 0.8 per cent in 2021.

“There is no guarantee that the economy will not take a dive. That is why it is necessary to ensure the competitiveness of Danish companies. If competitiveness is weakened, this may quickly result in weaker job growth at home, which will in earnest challenge the economy,” says Kent Damsgaard.

Weaker job growth will be a significant break with recent years’ impressive increase in employment. Since April 2013, 244,000 private sector jobs have been added, and between September 2018 and September 2019, private sector employment increased by 30,000 people.

In DI’s forecast, private sector employment is expected to increase by 15,000 people in both 2020 and 2021.

See also: Danish salaries stretch further

Peter Thagesen

Director, International Market Policy

  • Direct +45 3377 3752
  • Mobile +45 2949 4569
  • E-mail pth@di.dk

Related