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Denmark’s finance ministry expects inflation to ease in 2023

Next year could see the end of extraordinarily high prices which have become prevalent on Denmark’s consumer market in 2022, according to an updated forecast from the country’s Ministry of Finance.

Denmark's finance ministry expects inflation to ease in 2023
Denmark's finance ministry has published a new projection for the economy in 2023. Photo: Philip Davali/Ritzau Scanpix

A new economic forecast published by Denmark’s Ministry of Finance on Thursday predicts lower inflation next year, but notes that a potential switching off by Russia of gas supplies to Europe could complicate the outlook.

Inflation is expected to end at 3.3 percent in 2023, significantly lower than the current level of 8.7 percent.

The prognosis is based on an expectation that oil and gas prices next year will not go above the highest level so far recorded in 2022.

But a significant degree of uncertainty must be attached to this prediction, according to a summary published by the ministry.

“These are very uncertain assessments and the margin of error is broad,” the summary states.

Finance ministry economists have also produced a hypothetical ‘risk scenario’ in which Russia turns off gas supplies to Europe.

In that scenario, inflation is predicted to reach 4.3 percent. Additionally, employment would fall by 28,400 compared to the original estimate of 7,900. The economy would meanwhile shrink by 0.4 percent instead of a predicted growth of 0.8 percent.

An uncertainty factor is calculated into the hypothetical risk scenario, assuming that consumers and businesses would be more hesitant to spend and invest because of the unstable economic situation.

READ ALSO: What is in Denmark’s draft 2023 budget?

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ENERGY

Danish Energy Agency advises homes with gas heating to conserve

The Danish Energy Agency (Energistyrelsen) has issued guidelines to households heated by individual gas heaters in a bid to help them avoid very high bills.

Danish Energy Agency advises homes with gas heating to conserve

Around 240,000 households in Denmark will receive advice from the agency by physical or digital post, the agency said in a statement on Friday.

Gas prices in Denmark are currently rising as temperatures drop and energy production from wind turbines falls due to weather conditions.

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“The Danish Energy Agency views it as an important task to help people like those with individual gas heaters [Danish: gasfyr] through good advice about how they best can reduce their heating consumption and take the worst off their gas bill,” head of office Vincent Rudnicki said in the statement.

The information letters are part of a national energy saving campaign which seeks to cut energy consumption during a period when prices can go through large variations.

When gas prices reached their 2022 peak in August, one megawatt hour of gas cost over 300 euros according to the Dutch exchange TTF.

At the beginning of December, the price has increased to 131 euros per megawatt hour after going through a period with lower prices during the autumn.

Although the price remains low compared to August, it is higher than it was two years ago, according to comments previously given to news wire Ritzau by Sydbank’s senior economist Søren Kristensen.

Kristensen said that the cost of heating a housing in Denmark is now 10,000 kroner per year higher on average than it was in the years prior to the energy crisis.

He also said that the winter is likely to push prices up from their current level.

“That will unfortunately mean that it will in no way be a cheap winter in relation to heating up the house or using electricity,” he said.

The Danish Energy Agency information letter will be sent to persons who own single-family houses which are heated by natural gas heaters, according to information stored on the national register BBR (Bygnings- og Boligregistret).

“At this time we have particular focus on those who live in villas or semi-detached houses because they have seen the largest of all the gas bill increases,” Rudnicki said.

In some cases, persons who no longer have gas heating will receive the letter if the BBR registry has not been updated, he noted.

Advice included in the information packs includes reducing temperature, using less hot water and having gas boilers services.

The saving tips may also be relevant for people who live in other types of housing, such as apartments, rental houses or terraced houses, according to the Energy Agency.

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