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 | 2022 | 2023 (E) | 2024 (E) | 2025 (E) | 2026 (E) |
| GDP (billions USD) | 401.13 | 420.80 | 431.25 | 448.39 | 466.92 |
| GDP (Constant Prices, Annual % Change) | 2.7 | 1.7 | 1.4 | 1.2 | 1.3 |
| GDP per Capita (USD) | 68,295 | 71,402 | 72,940 | 75,584 | 78,431 |
| General Government Balance (in % of GDP) | 0.9 | 0.9 | 0.5 | 0.4 | 0.3 |
| General Government Gross Debt (in % of GDP) | 29.7 | 30.1 | 29.0 | 28.7 | 28.6 |
| Inflation Rate (%) | n/a | 4.2 | 2.8 | 2.1 | 2.1 |
| Unemployment Rate (% of the Labour Force) | 4.5 | 5.0 | 5.0 | 5.0 | 5.0 |
| Current Account (billions USD) | 54.06 | 47.97 | 42.48 | 42.62 | 43.23 |
| Current Account (in % of GDP) | 13.5 | 11.4 | 9.9 | 9.5 | 9.3 |
Source: IMF – World Economic Outlook Database , October 2021
Country Risk
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