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 | 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
See the country risk analysis provided by La Coface.
