Danish economy defies headwinds to grow by 3.6 percent

The Danish economy grew by 3.6 percent last year despite inflation and other challenges.

Danish economy defies headwinds to grow by 3.6 percent
Denmark's economy grew strongly last year although the figure may have received an artificial boost from an investment in the pharmaceutical sector, according to experts. File photo: Kristian Djurhuus/Ritzau Scanpix

Calculations of Denmark’s GDP by national agency Statistics Denmark show that the economy grew by 3.6 percent last year.

While the beginning of 2022 was affected by post-Covid economic recovery, the result shows that the Danish economy coped with other challenges presented during the year, an expert said.

“Corona restrictions affected the beginning of the year and were replaced by huge economic uncertainty and energy crisis after Russia’s invasion of Ukraine, with increasing inflation and interest rates resulting,” Lisette Rosenbeck Christensen, senior economist with Arbejdernes Landsbank, told news wire Ritzau.

“These are just some of the challenges that the Danish economy met in 2022. Nevertheless, the economy is stronger and bigger on the other side. That is quite simply impressive,” she said.

The economy grew by 0.9 percent in the fourth quarter of last year alone. But a closer look shows this figure could be misleading, a second analyst said.

“The high growth at the end of 2022 unfortunately appears to be a mirage if you look a little closer at today’s figures,” Tore Stramer, senior economist with the Danish Chamber of Commerce, said.

“The high GDP growth is primarily driven by the pharmaceutical industry and the purchase of a patent which gave rise to a very large advance in gross investments,” he said.

“Production in the pharmaceutical industry alone increased by 46 percent in December last year, which is very extraordinary,” he said.

READ ALSO: Why prices in Denmark could still increase despite falling inflation

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Danish central bank raises interest rate by 0.5 percent 

Denmark’s central bank Nationalbanken raised its interest rate by 0.5 percent on Thursday in response to a similar move by the European Central Bank (ECB).

Danish central bank raises interest rate by 0.5 percent 

The Danish central bank confirmed the decision in a statement after the ECB earlier on Thursday increased its rate by the same amount, bringing it up to 3 percent.

The latest raise is the sixth time within the last year that the ECB has put its interest rate up.

The new rate is the highest set by the ECB since the Global Financial Crisis in 2008.

The Danish National Bank’s interest rates are slightly lower than the ECB’s — 2.6 percent for deposits and 2.75 percent for loans following Thursday’s increases. That is because Nationalbanken increased its interest rates by 0.15 percent less than the ECB the last time the rates were raised, at the start of February. Similarly, it raised its rate by slightly less than the ECB in December.

There is nothing unusual about the Danish central bank’s decision to follow the ECB in raising the interest rate, however.

Earlier this week, Nationalbanken called for political measures to keep a rein on inflation as it said wage increases given to people under the Danish labour system in 2023 and 2024 could help to keep inflation levels up.

It also predicted house prices are set to fall by almost 10 percent this year.

One effect of raised interest rates is that people who have variable rate mortgages could find themselves paying more for their loans.