Core Views Although Denmark is not part of the eurozone monetary union, its deep financial and trade links have been strengthened by its pegged exchange rate regime, leaving its open economy dependent on eurozone demand and significantly exposed to any flare up of the eurozone debt crisis. A burst housing bubble and subsequent bank failures have made Denmark a Nordic underperformer, and the after-effects will continue to weigh on growth in the medium term. Although Denmark is in the process of staging a broad based economic recovery, the outlook remains dependent stable external demand and a sustained recovery in house prices. Denmark has been singled out as a relative safe haven given its favourable public debt dynamics and fixed currency regime. However, this inflow of capital has masked structural economic problems, and should investors start leaving the country it could expose an array of problems, most problematic of which could be a rise in interest rates and drop in house prices.
The government of Denmark has repeatedly expressed its commitment to its pegged currency regime, confirming our view that the country will not join the eurozone in the next decade. The public sector will remain one of the largest in Europe for the foreseeable future, as Denmark’s deeply ingrained welfare model remains broadly popular. However, gradual reforms are likely to continue in the coming years that scale back benefit programs and reduce the tax burden. Although we expect public expenditure to remain elevated, the government’s substantial tax revenues will enable it to keep deficit and debt levels on a sustainable trajectory.
Major Forecast Changes No Major Forecast Changes
Table Of Contents
Denmark Business Forecast Report Q4 2014 Executive Summary 5 Core Views...5 Major Forecast Changes.5 Key Risks To Outlook5 Chapter 1: Political Outlook.. 7 SWOT Analysis 7 BMI Political Risk Ratings.. 7 Domestic Politics. 8 Focus Will Remain On Tax And Expenditure Reductions..8 Regardless of 2015 general election results we believe the government of Denmark will maintain a tight fiscal policy in the years ahead, focusing on tax reduction and a gradual scaling back of the state's generous universal welfare model in order to bolster international competitiveness and ensure the long-term stability of public finances . TABLE: POLITICAL OVERVIEW8 Chapter 2: Economic Outlook.. 11 SWOT Analysis... 11 BMI Economic Risk Ratings.. 11 Economic Activity... 12 Recovery Strengthening, Limited Upside.12 We have revised up our Danish real GDP growth forecast in 2014 to 1.4%, from 1.3% previously, but are holding to our 1.6% estimate in 2015. Although coincident and leading indicators in H114 point towards a broad based economic expansion underway, growth potential in both the short and long term will be fundamentally constrained by eurozone stagnation, rising geopolitical tensions and ongoing household deleveraging. TABLE: GDP By Expenditure..12 Chapter 3: Business Environment 15 SWOT Analysis... 15 BMI Business Environment Risk Ratings 15 Chapter 4: Key Sectors... 17 Pharmaceuticals and Healthcare... 17 TABLE: Pharmaceutical Sales, Historical Data And Forecasts18 TABLE: Healthcare Expenditure Trends, Historical Data And Forecasts 19 TABLE: Government Healthcare Expenditure Trends, Historical Data And Forecasts... 19 TABLE: Private Healthcare Expenditure Trends, Historical Data And Forecasts... 19 Table: Oil and Gas Sector Key Indicators.21 Table: Telecoms Sector Key Indicators....21 Other Key Sectors... 21 Table: Autos Sector Key Indicators.22 Table: Food and Drink Sector Key Indicators...22 Table: Infrastructure Sector Key Indicators.22 Chapter 5: BMI Global Assumptions. 23 Global Outlook.... 23 US Revision Drags Down Forecast.23 Table: Global Assumptions23 Table: Developed States, Real GDP GrowtH, %..24 Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %.. 24 Table: Emerging Markets, Real GDP Growth, %.25