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Optimism for Danish economy as inflation and slowdown predicted to ease

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Ritzau/The Local - [email protected]
Optimism for Danish economy as inflation and slowdown predicted to ease
According to a recent financial report from the government, it is anticipated that the Danish economy will experience a less severe slowdown this year compared to previous forecasts. Photo by Nate Holland on Unsplash

The slowdown of the Danish economy is expected to be milder this year than previously feared, according to a new government financial report.

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Inflation is on the way down and there has been an improvement in confidence indicators from the low point reached last autumn, found a report presented by Acting Economy Minister Stephanie Lose on Wednesday.

"The main scenario is a soft landing, where economic activity gradually comes closer to the structural level that is compatible with stable price and wage development," it read.

READ ALSO: How will Denmark’s 2023 budget affect your finances?

The government said it expects gross domestic product (GDP) growth of 0.6 percent this year. As recently as March, it predicted growth of 0.2 percent in 2023.

By comparison, GDP grew by 3.6 percent last year.

GDP is an expression of the size of a country's economy and is the most used key figure to measure it. Increases or decreases in GDP show whether the economy is growing or shrinking.

More optimism for employment and real wages

The government  a more optimistic view of the development of employment in the country. In 2023, employment is expected to remain at the same level as seen last year. It is expected to fall slightly in 2024 - albeit from a record-high level.

After a year of rising interest rates and high inflation, many private consumers have seen their real wages fall.

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The real wage denotes what the wage earners actually get out of their income, i.e., the amount of goods and services that they can buy.

So, if real wages rise, consumers can get more for their money than before.

If the economic report is to be believed, the central collective bargaining agreement for the labour market will, however, increase Danes' financial leeway again already in 2023.

"Most of the real wage loss in 2022 can be made up during 2024," the government predicted.

According to the report, expected developments will likely also help keep house prices under control.

House prices are expected to rise again from next year. Before then, however, a further price drop during the remaining part of 2023 is to be expected.

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