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Economic Overview

Being a small country with an open economy and a structural balance of payments surplus, Denmark– although prosperous - is highly dependent on foreign trade. Nevertheless, the country proved relatively resilient to the pandemic-related challenges and was only marginally affected by the effects of the Russian invasion of Ukraine. In fact, in 2022, the Danish economy demonstrated robust growth propelled by exports and private investment (+2.7%). However, a mild deceleration was recorded in 2023 (+1.7% as per the IMF, +1.2% according to the EU Commission), attributed to consistently elevated energy prices and inflation, coupled with a decline in private savings. A partial recovery is expected in domestic demand, driven by increased real wages reigniting private consumption. The obstacles to investment, arising from interest rates and a demand deficit, are projected to ease and government consumption is poised to rise, yet net exports are expected to play a diminished role in overall economic growth. Overall, the IMF expects GDP growth at 1.4% this year and 1.2% in 2025.


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 recent years, the ratio stood at around 30.1% in 2023 and is expected to follow a downward trend (29% in 2024 and 28.7% in 2025), supported by sustained government surpluses and the impact of denominator effects, albeit offset by significant stock-flow adjustment items. After recording a government budget surplus of 3.3% of GDP in 2022, the surplus was projected to decrease to 2.6% in 2023 (EU Commission). This decline is attributed to rising expenditures in government consumption, investment, and defence donations to Ukraine, while revenues experienced marginal growth. In 2024, the surplus is expected to further decrease to 1.8% of GDP, driven by increased government consumption, public salaries, lower revenue due to tax rebates, and extraordinary repayments related to overpaid property tax during the transition to a new tax system. This trend should continue in 2025, with the surplus diminishing to 1.2% of GDP. In 2022 and 2023, robust inflation in energy, food, and commodities resulted in a significant decline in households' purchasing power, causing real private consumption to either stagnate or decrease. Overall, inflation reached 4.2% in 2023 and should gradually decrease to 2.1% by 2025 (IMF).

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 74,958 PPP in 2023, IMF). The unemployment rate stood at 5% in 2023, and although it increased moderately year-on-year, it is still below its pre-crisis level. In the upcoming future, unemployment may increase as firms adjust to higher labour costs and weaker demand.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 400.17405.20409.99424.33441.47
GDP (Constant Prices, Annual % Change) 2.71.82.11.51.5
GDP per Capita (USD) 68,13268,30068,89871,12773,789
General Government Balance (in % of GDP) 1.00.90.80.50.2
General Government Gross Debt (in % of GDP) 29.830.429.228.628.6
Inflation Rate (%) 8.53.41.52.02.0
Unemployment Rate (% of the Labour Force) 4.54.94.94.94.9
Current Account (billions USD) 53.4944.1840.6241.0141.71
Current Account (in % of GDP) 13.410.99.99.79.4

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 accounts for only 1.2% 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 103.818 million in 2022 (+20.1% year-on-year).

Industry employs around 19% of the active population and contributes 19.7% 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 (67.3%) 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. Overall, mortgage loans for companies and households constitute almost 80% of total lending in Denmark (European Banking Federation). The tourism sector is becoming a growing source of income for the country: according to the latest figures by Statistics Denmark, the number of overnight stays stood at 57.7 million between January and November 2023, in line with the numbers recorded in 2022, when the tourism sector witnessed a rebound from the COVID-19 pandemic. 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) 2.0 19.3 78.6
Value Added (in % of GDP) 0.8 20.9 66.3
Value Added (Annual % Change) -5.7 13.8 1.9

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 2022, it represented 129% of the country’s GDP (World Bank – latest data available). Denmark mainly exports chemicals and related products, machinery (especially wind turbines, of which Denmark is the leading manufacturer worldwide), and live animals, food, beverages and tobacco. Its main imports are motor vehicles, pharmaceuticals, petroleum oils, and electrical energy (Comtrade). The country is the world’s second-largest shipping operator and transportation was the main imported and exported service in 2022.

According to data by Comtrade, in 2022 Denmark’s main trading partners were Germany (14.3%), Sweden (8.5%), Norway (5.6%), the Netherlands (5.5%) and the U.S. (4.7%). The country’s imports principal origins were Germany (20.1%), Sweden (12.2%), the Netherlands (8.6%), China (8,4%) and Norway (4.5%). 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 2022, Denmark exported goods worth USD 130.2 billion and USD 126.3 billion of services (+3.4% and +3.2%, respectively), while imports stood at USD 126.4 billion for goods and USD 97.2 billion for services (+5.1% and +16.9% y-o-y – data WTO).  According to data from the World Bank, in 2022 the overall trade surplus for goods and services reached 11.1% of GDP.

 
Foreign Trade Values 20192020202120222023
Imports of Goods (million USD) 98,18498,298120,307128,340126,653
Exports of Goods (million USD) 111,076108,454125,945131,793136,631
Imports of Services (million USD) 76,33772,05084,96099,765106,712
Exports of Services (million USD) 83,40476,12596,985131,637113,416

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

Foreign Trade Indicators 20182019202020212022
Foreign Trade (in % of GDP) 107.0110.2103.5112.2128.0
Trade Balance (million USD) 12,82918,44018,84615,12012,386
Trade Balance (Including Service) (million USD) 21,80625,66322,92227,14444,259
Imports of Goods and Services (Annual % Change) 5.13.0-3.68.04.2
Exports of Goods and Services (Annual % Change) 3.44.5-6.38.08.6
Imports of Goods and Services (in % of GDP) 50.451.648.652.558.7
Exports of Goods and Services (in % of GDP) 56.658.654.959.769.3

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20232024 (e)2025 (e)2026 (e)2027 (e)
Volume of exports of goods and services (Annual % change) 12.59.22.01.91.8
Volume of imports of goods and services (Annual % change) 7.66.31.91.91.9

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)
2022
Germany 14.3%
Sweden 8.5%
Norway 5.6%
Netherlands 5.5%
United States 4.7%
See More Countries 61.4%
Main Suppliers
(% of Imports)
2022
Germany 20.1%
Sweden 12.2%
Netherlands 8.6%
China 8.4%
Norway 4.5%
See More Countries 46.2%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
Monarch: King Frederik X (since 14 January 2024)
Prime Minister: Mette Frederiksen (since 27 June 2019) – Social Democrats (Socialdemokratiet)
Next Election Dates
Parliamentary: 31 October 2026
Current Political Context

Left parties retained their majority in the 2022 snap elections, 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: for the first time in over four decades, the newly formed government departed from the conventional left-right division, marking the country's initial majority coalition government since 1993. Given the traditional stability of the Danish political system, the government is likely to remain in office until the scheduled election in November 2026.
The most pressing concerns for the Danish population include inflation, climate change, healthcare, and immigration. The coalition has unveiled its strategy to achieve climate neutrality for Denmark by 2045 and decrease national carbon dioxide emissions. The Danes also 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

Travel restrictions
Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.
Import & export restrictions
A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
The information on the economic recovery scheme put in place by the Danish government to address the impact of the COVID-19 pandemic can be accessed on the dedicated page on the website of the KPMG.
The summary of the EU’s economic response to the COVID-19 pandemic is available on the website of the European Council.
For the general overview of the key economic policy responses to the COVID-19 pandemic (fiscal, monetary and macroeconomic) undertaken by the Danish government, please consult the section dedicated to Denmark in the IMF’s Policy Tracker platform.
Support plan for businesses
For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, 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.

 

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