Economic and Political Overview

flag Denmark Denmark: Economic and Political Overview

In this page: Economic Outline | Political Outline | COVID-19 Country Response

 

Economic Outline

Economic Overview

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Being a small country with an open economy and a structural balance of payments surplus, Denmark– although prosperous - is highly dependent on foreign trade. This is why the country has been severely affected immediately after the outbreak of the COVID-19 pandemic. Nevertheless, Denmark proved relatively resilient to the pandemic-related challenges, growing at a strong pace following the lifting of most restrictions. A rapid rebound in private consumption as the economy reopened saw GDP and employment exceed their pre-crisis levels, with growth estimated at 3.8% in 2021 (IMF). In 2022, domestic demand is expected to be bolstered by increased private spending and investment, while the foreign sector should also contribute to growth. The IMF forecasts a growth of 3%, followed by 1.9% in 2023. However, uncertainty remains due to the recrudescence of the COVID-19 virus.

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 2021 the country’s debt burden resumed a gradually declining path (38.8%, from 42.1% one year earlier), which is expected to continue in 2022 (38.5% - IMF). 2021 also saw an increase in the general government budget balance, estimated at -0.9%. Nevertheless, thanks to the phasing-out of emergency measures and strong revenue growth owing to the continued expansion, the budget is expected to turn positive as from 2022 (1.4% according to the EU Commission, although the IMF has a more conservative view – at -0.1%). Consumer prices have accelerated sharply in 2021, fuelled by an upswing in energy prices and increases in tobacco excise taxes. Inflation stood at 1.4%, and growing domestic demand is set to contribute to higher consumer prices over the forecast period (1.6% this year and 1.8% in 2023 – 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 61,478 PPP in 2021, IMF). The unemployment rate remained relatively low even during the peak of the pandemic, and stood at 5.4% in 2021 when a sharp increase in employment has caused recruitment problems in several sectors. In fact, Denmark experiences endemic labour shortages, which are projected to ease to a certain degree due to the growing labour force driven by a rise in the number of workers from other EU countries and the gradual increase in the retirement age. The IMF forecasts a continued decrease in the unemployment rate, projected at 5.3% this year and 5.1% in 2023.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 347.56e356.09e396.67414.55436.62
GDP (Constant Prices, Annual % Change) 2.1e-2.1e3.83.01.9
GDP per Capita (USD) 59,862e61,154e67,92070,76974,314
General Government Balance (in % of GDP) 1.3-0.9e-2.1-0.2-0.1
General Government Gross Debt (in % of GDP) 33.642.1e38.838.538.7
Inflation Rate (%) 0.70.3e1.93.82.1
Unemployment Rate (% of the Labour Force) 5.05.6e5.45.35.1
Current Account (billions USD) 30.4229.34e27.6028.3529.24
Current Account (in % of GDP) 8.88.2e7.06.86.7

Source: IMF – World Economic Outlook Database, October 2021

Note: (e) Estimated Data

 

Main Sectors of Industry

The agricultural sector only accounts for 1.3% of the GDP and employs 2% of the 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 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).

Industry employs around 19% of the active population and contributes 21.2% 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 by the World Bank, manufacturing accounts for 14% of the country’s GDP.

The services sector contributes almost three-quarters of GDP (64.6%) and employs the largest share of the population (79.2%). 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. The tourism sector is becoming a growing source of income for the country, although the sector has been severely hit by the COVID-19 pandemic. Trade and transport services are also important for the country’s economy (Denmark is the world’s fifth-largest shipping operator).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 2.2 18.5 79.2
Value Added (in % of GDP) 1.3 21.2 64.6
Value Added (Annual % Change) 6.1 -0.7 -3.0

Source: World Bank, Latest available data.

 

Find more information about your business sector on our service Market Reports.

Indicator of Economic Freedom

Definition:

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.

Score:
77,8/100
World Rank:
10
Regional Rank:
5

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

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.

Score:
8.32/10
World Rank:
6/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2021-2025

 

Country Risk

See the country risk analysis provided by Coface.

 

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Political Outline

Current Political Leaders
Monarch: Queen Margrethe II (since January 1972); Heir Apparent Crown Prince Frederik (elder son of the monarch, born on 26 May 1968)
Prime Minister: Mette Frederiksen (since 27 June 2019) – Social Democrats (Socialdemokratiet)
Next Election Dates
Parliamentary: June 2023
Current Political Context

In the last two years, the head of the Social Democrats Mette Frederiksen has been leading a single-party government (48 seats out of 179), which however has the support of the “red bloc”, consisting of the Social Liberals (16 seats), Socialist People's Party (14 seats), the Red-Green Alliance (13 seats), the Faroese Social Democratic Party and the Greenlandic Siumut. The opposition (“blue block”) is formed by “Venstre” (43 seats, conservative-liberal party), the right-wing Danish People’s Party (16 seats), the Conservative People’s Party (12 seats), the green party “Alternative” (5 seats) and the right-wing party “New Right” (4 seats).
The COVID-19 pandemic has been characterizing the political debate in 2021, with the so-called “Men in Black” movement and several alt-right groups protesting against the government’s handling of the crisis. Moreover, prime minister Mette Frederiksen was criticized over the culling of all Danish mink, infected by what was then suspected to be a highly contagious strain of the COVID-19 virus. As the government lacked legal authority to order the mass slaughter of 17 million minks, a commission is investigating whether Frederiksen had been warned that culling was illegal and ignored this recommendation. If so, the prime minister could face an impeachment trial over the breach of “Ministerial Accountability Act”.

Main Political Parties

The main political parties in Denmark are:

Type of State
Denmark (official name: Kingdom of Denmark) is a constitutional monarchy based on parliamentary democracy.
Executive Power
The Monarch is the head of the state and theoretically holds all executive powers, but in reality the executive powers are exercised by the Prime Minister on behalf of the monarch. In general, the leader of the majority party or coalition is appointed Prime Minister by the monarch. The cabinet, called Council of State, is appointed by the Monarch on Prime Minister's recommendation.
Legislative Power
The legislature is unicameral. The parliament called People's Assembly (or "Folketing") has the ultimate legislative authority; its 179 members are elected by popular vote on the basis of proportional representation to serve four-year terms. On a vote of no confidence motion the parliament may force the entire government to resign.
 

Indicator of Freedom of the Press

Definition:

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.).

World Rank:
4/180
 

Indicator of Political Freedom

Definition:

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.

Ranking:
Free
Political Freedom:
1/7
Civil Liberties:
1/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

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COVID-19 Country Response

COVID-19 epidemic evolution

To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in Denmark, visit the website of the Danish Health Authority which provides the official data. Please note that more detailed statistics are available on the Danish version of the website.
For the international outlook you can consult the latest
situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.

Sanitary measures

To find out about the latest public health situation in Denmark and the current sanitary measures in vigour, please consult the website of the Danish Health Authority including the up-to-date information on the containment measures put in place and public health recommendations. For further information, visit the website of the Danish Police.

Travel restrictions
The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.
The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.
Import & export restrictions

For the information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the portal of the Danish Custom Agency.
The “Guidelines for border management measures to protect health and ensure the availability of goods and essential services” issued by the European Commission can be consulted
here.
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to Denmark on the
International Trade Centre's COVID-19 Temporary Trade Measures webpage.

Economic recovery plan

For the information on the economic recovery scheme put in place by the Danish government to address the impact of the COVID-19 pandemic on the national economy, please visit the website of the Ministry of Finance and that of the Denmark Nationalbank. Further information can be accessed on the dedicated page on the website of the KPMG.
The information on the EU’s economic response to COVID-19 and the actions to minimise the fallout on the EU member states’ economies of the COVID-19 outbreak is available on the websites of the
European Commission and the European Council.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the Danish government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to Denmark in the
IMF’s Policy Tracker platform.

Support plan for businesses

The Danish Business Authority created a website dedicated to businesses (in Danish) which provides information on the policies adopted by the Danish government to help companies to deal with the economic impacts of the COVID-19 epidemic on their activity. Further information can be accessed on the website of the Copenhagen Capacity.
For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the OECD's SME Covid-19 Policy Responses document.

You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.

Support plan for exporters

For the up-to-date information on possible support plans for exporters in Denmark please consult the dedicated page on the website of Copenhagen Capacity. For further information on export credit guarantees for loans of Danish exporting companies consult the website of EKF Denmark and that of the Ministry of Industry, Business and Financial Affairs.
The European Commission adopted a Temporary Framework for State aid measures to support the economy in the COVID-19 outbreak, which enables short-term export credit insurance to be provided by the State where needed.

 

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Latest Update: October 2022