Denmark’s economy has been resilient to the COVID-19 crisis and has recovered rapidly. The past two years have seen a slowdown in economic activity related to rising energy prices and living costs. Living standards remain high, supported by carefully designed policies. Reforms should focus on addressing the long-term challenges posed by population aging and the digital and green transition.
Latest OECD Economic Survey of Denmark According to , GDP growth is expected to slow to 1.2% in 2024 and rise to 1.5% in 2025. Headline inflation is expected to fall to 2.8% in 2024 and 2.5% in 2025.
Despite the slowdown in economic activity, employment growth remains strong and recruitment challenges remain. Consumption and investment slowed. Rising borrowing costs are contributing to the downturn in the housing market. Key risks to the outlook include the inflationary impact of a deeper correction in the housing and real estate markets and developments in the labor market.
“The Danish economy has shown resilience to the COVID-19 crisis, although growth has slowed over the past two years. Public debt stands at around 30% of GDP, making it the highest among OECD countries. is among the lowest, and pension reform has contributed to improving long-term fiscal sustainability.” Ulrik Westergaard Knudsen OECD Under-Secretary-General he said, presenting the results of a survey conducted in Copenhagen. Danish Minister of Finance Nikolaj Wamen. “Looking forward, key policy priorities will be to promote longer working lives and address persistent workforce shortages, particularly in long-term care and the digital sector. Further encouraging emissions reductions across sectors. This will be an important contribution to advancing the green transition.”
Despite the success of pension reforms and rising employment rates for older workers, population aging poses risks to Denmark’s social model. Thanks to past reforms, public spending on pensions is projected to fall, and although private pension savings are high, annual net aging costs, including health and long-term care, are expected to increase by about 1.1% of GDP by 2050. It is predicted.
Planned reductions in regulatory constraints on local government autonomy may help achieve cost savings, but the impact of reforms on service quality needs to be carefully monitored. Other measures to increase efficiency include improving public procurement, deepening cooperation between local authorities, and reforming public employment services. Reforms to early retirement systems are needed to enable people with reduced work capacity to remain in the labor market.
Persistent labor shortages are hampering growth and complicating the provision of welfare services, particularly long-term care. Further shifting taxation from personal income to housing would strengthen work incentives. Changing education and training systems to meet evolving skills needs and reduce barriers to international recruitment in talent-shortage regions will help.
Educational reforms can accelerate young people’s entry into the labor market. Planned limits on the period of the very generous student allowance and targeting Year 10 students with higher learning needs would help lower the graduation age. Too few students choose to pursue vocational education and training. Reforms are needed to address the lack of mobility between vocational and academic courses, as well as efforts to promote the opportunities offered by vocational education.
Denmark has set ambitious greenhouse gas emission reduction targets and made significant progress in achieving effective climate change mitigation policies. Further policy reforms are needed. Green tax reform needs to be completed to accelerate emissions reductions and avoid distortions between sectors and technologies.
The introduction of a tax on emissions from agricultural production, currently under discussion, could help achieve this in a cost-effective manner. Tax revenue could be used to help farmers switch to lower-emission activities or reduce their emissions intensity during production.