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Economic and political overview

Economic Overview

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Being a small country with an open economy and a structural balance of payments surplus, Denmark– although prosperous - is highly dependent on foreign trade, hence the country was severely affected immediately after the outbreak of the COVID-19 pandemic. Nevertheless, Denmark proved relatively resilient to the pandemic-related challenges, growing at a strong pace in 2021 (4.9%) and 2022 (2.6% - IMF), driven mainly by net exports and the build-up of inventories. High energy prices and inflation, decreasing real disposable income, higher interest rates and geopolitical uncertainty amid the Russia-Ukraine conflict contributed to a deceleration in the second half of the year. Such a trend is expected to continue in 2023, with the IMF forecasting a moderate growth of 0.6%. For 2024, GDP is expected to grow 1.9% amid lower inflationary pressures.

The country’s public accounts are quite healthy, with one of the lowest debt-to-GDP ratios in Europe: although the measures taken by the government to address the pandemic led to an increase, in 2022 the debt burden stood at 31.8% of GDP and should decline further to 31.4% in 2024 (IMF). Thanks to the phasing-out of emergency measures and strong revenue growth Denmark recorded a budget surplus of 1.8% in 2022; however, growth in expenditure - mostly for the public sector wage bill - is expected to outpace that of revenue, leading to a reduction in the budget surplus (0.5% in 2023 and 0.4% in 2024 according to the EU Commission). Consumer prices have accelerated sharply in 2022, fuelled by an upswing in energy, raw materials and food prices. Overall, inflation reached 7.2% in 2022. Nevertheless, energy price inflation is forecast to turn negative from mid-2023 onwards, contributing to a deceleration of headline inflation to 3.8% this year and 2.4% in 2024.

The Danish economy is characterized by an equitable distribution of income and extensive government welfare measures, with one of the highest GDP per capita in the world (USD 69,845 PPP in 2022, IMF). The unemployment rate stood at 5.2% in 2022, well below its pre-crisis level. Despite that, several sectors are reporting labour shortages and high employment levels: in fact, Denmark experiences endemic labour shortages, which are projected to ease to a certain degree due to the growing labour force driven by a rise in the number of workers from other EU countries and the gradual increase in the retirement age. The IMF forecasts a stable unemployment rate over the forecast horizon (at 5.3% this year and 5.1% in 2024).

 
Main Indicators 202020212022 (E)2023 (E)2024 (E)
GDP (billions USD) 355.22398.30390.68405.63419.89
GDP (Constant Prices, Annual % Change) -2.04.93.60.01.0
GDP per Capita (USD) 61,00668,20266,51668,82771,019
General Government Balance (in % of GDP) 0.3-0.20.40.50.3
General Government Gross Debt (in % of GDP) 42.236.629.730.430.3
Inflation Rate (%) 0.31.98.54.82.8
Unemployment Rate (% of the Labour Force) 5.65.14.55.15.1
Current Account (billions USD) 27.9935.9750.0838.3432.36
Current Account (in % of GDP) 7.99.012.89.57.7

Source: IMF – World Economic Outlook Database , October 2021

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

The agricultural sector only accounts for 0.9% of the GDP and employs 2% of the active population (World Bank, latest data available). Approximately 60% of the Danish land is used for agriculture, and there are more than 50,000 farmers in the country, which is a major exporter of agricultural products (meat, fish, and dairy, among others). Denmark produces enough food to feed 17 million people, three times its population. Nearly 90% of the country's agricultural revenue comes from livestock production. The main crops in Denmark are small grains, mainly wheat and barley, covering more than half of the agricultural area. The organic market in Denmark is proportionally the biggest in the world, with organic food making up 12.8% of the total retail food market (Statistics Denmark). According to data from Statistics Denmark, the gross domestic product at factor cost for agriculture stood at DKK 86.273 million in 2021 (+4.3% compared to the pre-COVID level).

Industry employs around 19% of the active population and contributes 19.3% of GDP. The major activity sectors are the chemical, pharmaceutical and biotechnology industries, with niche industries in renewable energy and biotechnology. Denmark has limited natural resources, a fact that slows down the development of its heavy industry. However, the country has enough oil and gas reserves to ensure its energy independence. Uranium mining has been authorised to begin in the autonomous Danish territory of Greenland. Denmark is the world's leading manufacturer of wind turbines and exports the vast majority of its production. According to the latest data from the World Bank, manufacturing accounts for 12% of the country’s GDP.

The services sector contributes three-quarters of GDP (66.7%) and employs the largest share of the population (79%). Denmark has a strong banking sector, characterised by a high degree of concentration: domestic banks own more than 85% of the total assets, and three banks control 50% of total assets. The tourism sector is becoming a growing source of income for the country: although it has been severely hit by the COVID-19 pandemic, in 2021 the number of arrivals exceeded that of 2019. Trade and transport services are also important for the country’s economy (Denmark is the world’s second-largest shipping operator - Coface).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 2.2 18.5 79.2
Value Added (in % of GDP) 0.9 19.3 66.7
Value Added (Annual % Change) -15.3 5.2 5.3

Source: World Bank - Latest available data.

 
Monetary Indicators 20162017201820192020
Danish kroner (DKK) - Average Annual Exchange Rate For 1 USD 6.736.606.316.706.54

Source: World Bank - Latest available data.

 

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Foreign Trade

Denmark has historically been renowned as a nation of traders, with an economy extremely open to foreign trade: in 2021, it represented 112% of the country’s GDP (World Bank – latest data available). Denmark mainly exports pharmaceutical products, meat, blood, petroleum oils, electric generating sets and rotary converters (wind turbines, of which Denmark is the leading manufacturer worldwide). Its main imports are motor vehicles, pharmaceuticals, petroleum oils, automatic data processing machines, and telephones (Comtrade). The country is the world’s second-largest shipping operator and transportation was the main imported and exported service in 2021.

According to data by Comtrade, in 2021 Denmark’s main trading partners were Germany (12.9%), Sweden (9.3%), Norway (5.7%), the United Kingdom (5.7%) and the US (4.7%). The country’s imports principal origins were Germany (20.6%), Sweden (12.6%), the Netherlands (8.2%), China (8%) and Poland (4.4%). Considered as a whole, the European Union was Denmark’s main importing and exporting partner.

Denmark has a structural trade balance surplus (2009 being the last time the country had a negative balance). In 2021, Denmark exported goods worth USD 125.9 billion and USD 93.3 billion of services (+16.3% and +23.3%, respectively), while imports stood at USD 120.3 billion for goods and USD 81.7 billion for services (+25.4% and +17.7% y-o-y – data WTO). According to data from the World Bank, in 2021 the overall trade surplus for goods and services reached 7.1% of GDP. Figures from Statistics Denmark show that in the first ten months of 2022 exports of goods and services grew by 32% compared to the same period one year earlier, at a faster pace than imports (+26.2%).

 
Foreign Trade Values 20172018201920202021
Imports of Goods (million USD) 93,314102,60597,82497,561120,307
Exports of Goods (million USD) 102,559109,711110,779108,274125,945
Imports of Services (million USD) 61,92472,87975,86669,42481,723
Exports of Services (million USD) 66,47481,12983,16874,44093,382

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20172018201920202021
Foreign Trade (in % of GDP) 103.0107.0110.2103.5112.2
Trade Balance (million USD) 15,01012,82918,44018,68314,704
Trade Balance (Including Service) (million USD) 23,87921,80625,66322,86126,142
Imports of Goods and Services (Annual % Change) 4.25.13.0-3.68.0
Exports of Goods and Services (Annual % Change) 4.83.44.5-6.38.0
Imports of Goods and Services (in % of GDP) 47.950.451.648.652.5
Exports of Goods and Services (in % of GDP) 55.156.658.654.959.7

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20222023 (e)2024 (e)2025 (e)2026 (e)
Volume of exports of goods and services (Annual % change) 7.61.12.52.32.2
Volume of imports of goods and services (Annual % change) 3.70.12.52.22.2

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
Denmark is a member of the following international economic organisations: IMF, European Union, WTO, G-9, ICC, Euro-Atlantic Partnership Council (EAPC), OECD, among others. For the full list of economic and other international organisations in which participates Denmark click here.
Free Trade Agreements
The complete and up-to-date list of Free Trade Agreements signed by Denmark can be consulted here.
 

Main Partner Countries

Main Customers
(% of Exports)		 2021
Germany 12.9%
Sweden 9.3%
Norway 5.7%
United Kingdom 5.0%
United States 4.7%
See More Countries 62.3%
Main Suppliers
(% of Imports)		 2021
Germany 20.6%
Sweden 12.6%
Netherlands 8.2%
China 8.0%
Poland 4.4%
See More Countries 46.1%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
Monarch: Queen Margrethe II (since January 1972); Heir Apparent Crown Prince Frederik (elder son of the monarch, born on 26 May 1968)
Prime Minister: Mette Frederiksen (since 27 June 2019) – Social Democrats (Socialdemokratiet)
Next Election Dates
Parliamentary: 31 October 2026
Current Political Context

Following an ultimatum to the government by the Social Liberal Party due to the results of a report concerning the mink culling taken by the government headed by Mette Frederiksen (Social Democrats) amid the COVID-19 pandemic, snap elections were held on 1 November 2022. Left parties retained their majority, although it was reduced to a single seat. The governing Social Democrats achieved their best result in 20 years and Mette Frederiksen was confirmed as prime minister, leading a coalition government composed of the Social Democrats, Venstre and the Moderates, the first time since 1977 that both main parties are part of a coalition government.
The Danes voted on 1 June 2022 to join the European Union's defence and security common policy, ending a 30 year opt out.
Main Political Parties

The main political parties in Denmark are:
Executive Power
The Monarch is the head of the state and theoretically holds all executive powers, but in reality the executive powers are exercised by the Prime Minister on behalf of the monarch. In general, the leader of the majority party or coalition is appointed Prime Minister by the monarch. The cabinet, called Council of State, is appointed by the Monarch on Prime Minister's recommendation.
Legislative Power
The legislature is unicameral. The parliament called People's Assembly (or "Folketing") has the ultimate legislative authority; its 179 members are elected by popular vote on the basis of proportional representation to serve four-year terms. On a vote of no confidence motion the parliament may force the entire government to resign.
 

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COVID-19 Country Response

COVID-19 epidemic evolution

To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in Denmark, visit the website of the Danish Health Authority which provides the official data. Please note that more detailed statistics are available on the Danish version of the website.
For the international outlook you can consult the latest situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.
Sanitary measures

To find out about the latest public health situation in Denmark and the current sanitary measures in vigour, please consult the website of the Danish Health Authority including the up-to-date information on the containment measures put in place and public health recommendations. For further information, visit the website of the Danish Police.
Travel restrictions
The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.
The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.
Import & export restrictions

For the information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the portal of the Danish Custom Agency.
The “Guidelines for border management measures to protect health and ensure the availability of goods and essential services” issued by the European Commission can be consulted here.
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to Denmark on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan

For the information on the economic recovery scheme put in place by the Danish government to address the impact of the COVID-19 pandemic on the national economy, please visit the website of the Ministry of Finance and that of the Denmark Nationalbank. Further information can be accessed on the dedicated page on the website of the KPMG.
The information on the EU’s economic response to COVID-19 and the actions to minimise the fallout on the EU member states’ economies of the COVID-19 outbreak is available on the websites of the European Commission and the European Council.
For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the Danish government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to Denmark in the IMF’s Policy Tracker platform.
Support plan for businesses

The Danish Business Authority created a website dedicated to businesses (in Danish) which provides information on the policies adopted by the Danish government to help companies to deal with the economic impacts of the COVID-19 epidemic on their activity. Further information can be accessed on the website of the Copenhagen Capacity.
For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.
Support plan for exporters

For the up-to-date information on possible support plans for exporters in Denmark please consult the dedicated page on the website of Copenhagen Capacity. For further information on export credit guarantees for loans of Danish exporting companies consult the website of EKF Denmark and that of the Ministry of Industry, Business and Financial Affairs.
The European Commission adopted a Temporary Framework for State aid measures to support the economy in the COVID-19 outbreak, which enables short-term export credit insurance to be provided by the State where needed.
 

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