Lower energy prices take air out of Danish inflation

Inflation continued to fall in Denmark in January with lower energy prices a primary factor.

Lower energy prices take air out of Danish inflation
Inflation has eased in recent months but food prices remain well above 2020 levels, seen in this file photo. Photo: Mads Claus Rasmussen/Ritzau Scanpix

A latest inflation index which takes into account EU consumer prices was released by national agency Statistics Denmark on Tuesday.

The index shows a fall in the inflation level from 9.6 percent in December to 8.4 percent in January.

Although inflation is falling, it remains at a high level seen in a historical context.

Meanwhile, the measure of “core inflation” or kerneinflation continues to be a warning light for Danish consumers.

Core inflation is the inflation of prices excluding food and energy prices and is sometimes used by economists as a measure of how entrenched inflation has become in other areas of the economy. It fell marginally from 7.4 percent in December to 7.3 percent in January.

Because core inflation is steady while the overall, energy-driven inflation rate has started declining, end prices for consumers could remain high in the shorter term, even if energy bills are lower than they were in 2022.

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

“High core inflation shows that a broad cross section of Danish consumption is affected by price increases,” private economist with Arbejdernes Landsbank, Brian Friis Helmer, told news wire Ritzau in a comment.

Overall inflation for the EU was 10 percent in January according to the latest data, which confirm preliminary figures released earlier this month.

The EU figure is also slightly down month-on-month.

Inflation should continue to fall in coming months, Helmer predicted.

“Electricity and gas prices have fallen markedly since the crazy heights of late last summer and Danes’ budgets are therefore not as badly hit on that front,” he said.

“At the same time, global food and raw material prices and transport costs have fallen, and that can reduce the price burden on Danes,” he said.

“Inflation is a measure of the prices today compared to a year ago. Therefore, the steep price increases from last year will begin to fall away from inflation calculations as we progress through the year,” he also said.

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KEY POINTS: What is in Denmark’s 2023 budget proposal?

Denmark’s coalition government presented on Thursday a new budget proposal in which it said it was “stepping on the brakes” on state spending.

KEY POINTS: What is in Denmark’s 2023 budget proposal?

Danish budgets are usually tabled and eventually adopted during the autumn, but last year’s election disrupted the normal timetable.

The proposed budget, given the title “A Responsible Way Forward” (En ansvarlig vej frem) was presented by ministers from the three coalition parties on Thursday: Finance Minister Nicolai Wammen, acting Defence Minister Troels Lund Poulsen and Culture Minister Jakob Engel-Schmidt.

A cautious economic approach to spending is needed given global circumstances including the war in Ukraine, inflation and last year’s energy crisis, Wammen said.

“Even though a lot of things look good when we look at the Danish economy, that doesn’t change where we are. Uncertain times,” he said.

Engel-Schmidt added that some might describe the proposed budget as “boring”, given that it “doesn’t bring a shower of presents”.

Key points from the proposed budget are outlined below. The proposal will go into negotiations with other parties in parliament before being voted through in its final form.

Inflation assistance to lower income groups 

Last year saw the highest inflation rate for 40 years in Denmark, and the effects will still be felt in 2023 even if the inflation percentages themselves are less severe.

Although the government wants to “step on the brakes”, it has still set aside 2.4 billion kroner for financial assistance to people vulnerable to rising prices.

Some 1.1 billion kroner will be spent on 5,000 kroner “cheques” for elderly persons who receive social welfare. People who have high medicine costs and students who receive subsidies because they must provide for others, such as single parents (SU-forsørgertillæg) are also among groups to be assisted with the inflation spending.

READ ALSO: Danish government agrees inflation package for vulnerable families 

‘Acute plan’ for hospitals

An agreement with regional health authorities on an “acute” spending plan to address the most serious challenges faced by the health services has already been agreed, providing 2 billion kroner by the end of 2024.

The agreement was announced by the government along with regional and municipal officials in February.

READ ALSO: What exactly is wrong with the Danish health system?

‘Lower than ever’ reserve fund

A so-called “negotiation reserve” (forhandlingsreserve), a pool of money in the budget that can be allocated at a later date based on agreements between parties, has been significantly cut to 200 million kroner.

A 2023 budget proposal from August last year, which was not adopted due to the election, had the fund at 600 million kroner. The reserve has been as high as 1.5 billion kroner in the past, according to broadcaster DR’s report on Thursday’s proposal.

The previous, single-party Social Democratic government was reported to favour mental health services and the elderly as areas which could benefit from the fund in 2023.

The lower amount is partly due to the shorter timescale of this year’s budget. The 2024 budget will be proposed and passed in late 2023 under the regular timetable.

“There are still things we can prioritise but we are asking you to take responsibility to get Denmark through while inflation is still a major challenge,” Wammen said.

Spending on courts system

Some 32.2 million kroner has been put aside to specifically target a reduction in waiting times for court dates, DR writes. The money is part of a larger amount, 185 million kroner, to be spent on the courts.

Denmark’s courts system has in recent years seen a rising number of criminal cases and lengthy processing times.

Broadband internet to get boost in rural spending

The “broadband fund” or bredbåndspulje will get an additional 100 million kroner to improve coverage in areas that still have patchy connection.

Another 100 million kroner will go into the landsbypulje or “Village Fund”, giving rural municipalities funding for demolition or renovation of deteriorated buildings.


A majority in parliament has already voted in favour of a seven-billion kroner fund in 2023 to help Ukraine defend itself against the Russian invasion.

The fund will be spent on Danish military, civilian and commercial assistance to Ukraine.

Part of the spending is funded by Denmark’s international development budget, while over 5 billion comes from spending an increased portion of the national GDP on the 2023 budget.

READ ALSO: Denmark announces seven-billion kroner Ukraine fund