What does Denmark’s GDP drop tell us about jobs and the economy?

What has happened to Denmark’s economy?

Denmark's gross domestic product (GDP) – one of the main indicators of the health of the national economy – fell by 7.4 percent in the second quarter of 2020 compared with the first quarter.

The Danish economy also shrank, by around 2 percent, in the first quarter of 2020, meaning the country is now technically in a recession.

The latest figures are according to national database Statistics Denmark, and were released last week.

Note that these are not final statistics. The GDP figures from Statistics Denmark are preliminary and will be reviewed as more information comes in.

READ ALSO: Denmark's economy suffers 'historic' GDP drop in second quarter

How will it impact every day life?

Most of the effects of such a shrinkage of the economy are likely to be felt indirectly at this stage, according to Casper Schrøder, economics correspondent with national broadcaster DR.

“Many will not be experiencing a direct impact from the (economic) crisis here and now. They have not been fired and are receiving the same wages. But the crisis will affect them indirectly, and that will become clearer in the coming time,” Schrøder said to DR.

Those impacts include a slowing down of pay rises and the knock-on effect of this -- reduced tax revenues at local and national level -- will eventually be evident in public services, he explained.

 

Are jobs going to be lost?

There is no “general” need to worry about increasing unemployment, according to Schrøder’s assessment.

“We are not going to see mass unemployment across sectors in Denmark,” he said to DR.

But some redundancies are likely in the coming months in the most hard-hit sectors, he added. Those sectors include those which are reliant on large gatherings for income.

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Industries which have high levels of trade with countries where economies have been hit even harder than Denmark could also face job losses, Schrøder said.

What are the prospects for short-term recovery?

A tough period is expected in the autumn, according to the DR analyst.

“I think this will be an autumn in which some companies take difficult decisions to let staff go or maybe close completely because they can now see they can’t keep their heads above water,” he said to the broadcaster.

Denmark is a “small, open economy” that “coped very well with the (coronavirus lockdown) crisis” he added, noting that the situation was worse in other countries.

But that could mean those countries may struggle to afford Danish products, he pointed out.

These are the latest available flash estimates of GDP growth in the second quarter from Eurostat:

EU average: -11.9
Belgium: -12.2
Czechia: -8.4
Germany: -10.1
Spain: -18.5
France: -13.8
Italy: -12.4
Latvia: -7.5
Lithuania: -5.1
Austria: -10.7
Portugal: -14.1
Sweden: -8.6

“Such a big drop (in GDP) in a short time is serious enough in itself, but the big concern now is about how long it will take for the economy to recover. After all, this is ultimately about people's opportunities to get a job and a salary that can give them a good life,” Schrøder also said.