Denmark: Economic and Political Overview
In this page: Economic Outline | Political Outline | COVID-19 Country Response
Being a small country with an open economy and a structural balance of payments surplus, Denmark– although prosperous - is highly dependent on foreign trade. Nevertheless, the country proved relatively resilient to the pandemic-related challenges and was only marginally affected by the effects of the Russian invasion of Ukraine. In fact, in 2022, the Danish economy demonstrated robust growth propelled by exports and private investment (+2.7%). However, a mild deceleration was recorded in 2023 (+1.7% as per the IMF, +1.2% according to the EU Commission), attributed to consistently elevated energy prices and inflation, coupled with a decline in private savings. A partial recovery is expected in domestic demand, driven by increased real wages reigniting private consumption. The obstacles to investment, arising from interest rates and a demand deficit, are projected to ease and government consumption is poised to rise, yet net exports are expected to play a diminished role in overall economic growth. Overall, the IMF expects GDP growth at 1.4% this year and 1.2% in 2025.
The country’s public accounts are quite healthy, with one of the lowest debt-to-GDP ratios in Europe: although the measures taken by the government to address the pandemic led to an increase in recent years, the ratio stood at around 30.1% in 2023 and is expected to follow a downward trend (29% in 2024 and 28.7% in 2025), supported by sustained government surpluses and the impact of denominator effects, albeit offset by significant stock-flow adjustment items. After recording a government budget surplus of 3.3% of GDP in 2022, the surplus was projected to decrease to 2.6% in 2023 (EU Commission). This decline is attributed to rising expenditures in government consumption, investment, and defence donations to Ukraine, while revenues experienced marginal growth. In 2024, the surplus is expected to further decrease to 1.8% of GDP, driven by increased government consumption, public salaries, lower revenue due to tax rebates, and extraordinary repayments related to overpaid property tax during the transition to a new tax system. This trend should continue in 2025, with the surplus diminishing to 1.2% of GDP. In 2022 and 2023, robust inflation in energy, food, and commodities resulted in a significant decline in households' purchasing power, causing real private consumption to either stagnate or decrease. Overall, inflation reached 4.2% in 2023 and should gradually decrease to 2.1% by 2025 (IMF).
The Danish economy is characterized by an equitable distribution of income and extensive government welfare measures, with one of the highest GDP per capita in the world (USD 74,958 PPP in 2023, IMF). The unemployment rate stood at 5% in 2023, and although it increased moderately year-on-year, it is still below its pre-crisis level. In the upcoming future, unemployment may increase as firms adjust to higher labour costs and weaker demand.
| Main Indicators | 2022 | 2023 (E) | 2024 (E) | 2025 (E) | 2026 (E) |
|---|---|---|---|---|---|
| GDP (billions USD) | 400.17 | 405.20 | 409.99 | 424.33 | 441.47 |
| GDP (Constant Prices, Annual % Change) | 2.7 | 1.8 | 2.1 | 1.5 | 1.5 |
| GDP per Capita (USD) | 68,132 | 68,300 | 68,898 | 71,127 | 73,789 |
| General Government Balance (in % of GDP) | 1.0 | 0.9 | 0.8 | 0.5 | 0.2 |
| General Government Gross Debt (in % of GDP) | 29.8 | 30.4 | 29.2 | 28.6 | 28.6 |
| Inflation Rate (%) | 8.5 | 3.4 | 1.5 | 2.0 | 2.0 |
| Unemployment Rate (% of the Labour Force) | 4.5 | 4.9 | 4.9 | 4.9 | 4.9 |
| Current Account (billions USD) | 53.49 | 44.18 | 40.62 | 41.01 | 41.71 |
| Current Account (in % of GDP) | 13.4 | 10.9 | 9.9 | 9.7 | 9.4 |
Source: IMF – World Economic Outlook Database, Latest data available.
Note : (E) Estimated data
The agricultural sector accounts for only 1.2% of the GDP and employs 2% of the active population (World Bank, latest data available). Approximately 60% of the Danish land is used for agriculture, and there are more than 50,000 farmers in the country, which is a major exporter of agricultural products (meat, fish, and dairy, among others). Denmark produces enough food to feed 17 million people, three times its population. Nearly 90% of the country's agricultural revenue comes from livestock production. The main crops in Denmark are small grains, mainly wheat and barley, covering more than half of the agricultural area. The organic market in Denmark is proportionally the biggest in the world, with organic food making up 12.8% of the total retail food market (Statistics Denmark). According to data from Statistics Denmark, the gross domestic product at factor cost for agriculture stood at DKK 103.818 million in 2022 (+20.1% year-on-year).
Industry employs around 19% of the active population and contributes 19.7% of GDP. The major activity sectors are the chemical, pharmaceutical and biotechnology industries, with niche industries in renewable energy and biotechnology. Denmark has limited natural resources, a fact that slows down the development of its heavy industry. However, the country has enough oil and gas reserves to ensure its energy independence. Uranium mining has been authorised to begin in the autonomous Danish territory of Greenland. Denmark is the world's leading manufacturer of wind turbines and exports the vast majority of its production. According to the latest data from the World Bank, manufacturing accounts for 12% of the country’s GDP.
The services sector contributes three-quarters of GDP (67.3%) and employs the largest share of the population (79%). Denmark has a strong banking sector, characterised by a high degree of concentration: domestic banks own more than 85% of the total assets, and three banks control 50% of total assets. Overall, mortgage loans for companies and households constitute almost 80% of total lending in Denmark (European Banking Federation). The tourism sector is becoming a growing source of income for the country: according to the latest figures by Statistics Denmark, the number of overnight stays stood at 57.7 million between January and November 2023, in line with the numbers recorded in 2022, when the tourism sector witnessed a rebound from the COVID-19 pandemic. Trade and transport services are also important for the country’s economy (Denmark is the world’s second-largest shipping operator - Coface).
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
|---|---|---|---|
| Employment By Sector (in % of Total Employment) | 2.0 | 19.3 | 78.6 |
| Value Added (in % of GDP) | 0.8 | 20.9 | 66.3 |
| Value Added (Annual % Change) | -5.7 | 13.8 | 1.9 |
Source: World Bank, Latest data available.
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The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.
Source: The Economist Intelligence Unit - Business Environment Rankings 2021-2025
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Parliamentary: 31 October 2026
Left parties retained their majority in the 2022 snap elections, although it was reduced to a single seat. The governing Social Democrats achieved their best result in 20 years and Mette Frederiksen was confirmed as prime minister, leading a coalition government composed of the Social Democrats, Venstre and the Moderates: for the first time in over four decades, the newly formed government departed from the conventional left-right division, marking the country's initial majority coalition government since 1993. Given the traditional stability of the Danish political system, the government is likely to remain in office until the scheduled election in November 2026.
The most pressing concerns for the Danish population include inflation, climate change, healthcare, and immigration. The coalition has unveiled its strategy to achieve climate neutrality for Denmark by 2045 and decrease national carbon dioxide emissions. The Danes also voted on 1 June 2022 to join the European Union's defence and security common policy, ending a 30-year opt-out.
The main political parties in Denmark are:
The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).
The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.
Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House
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