The slow rate of growth of exports and consumption in 2016 thwarted the expected acceleration in growth. In 2017, there is likely to be a moderate upturn in activity, driven by domestic factors. Household consumption will underpin growth thanks to improvements in the labor market. Households are expected to spend more as wages and job opportunities increase, despite the very high debt levels (290% of disposable income, the highest ratio in the OECD). At the same time, increased household incomes will push up property prices as well as residential investment, in a context of very low interest rates. The danger of the property bubble bursting would increase if interest rates were to be raised. In addition, investment will make a positive contribution to growth, sustained by increased consumption and a relaxed monetary policy on the part of the Central Bank. The sectors in question are the pharmaceutical, capital goods (transport in particular) and construction sectors. These sectors, with large workforces, will sustain economic activity thanks to an improved utilization of production capacities, part of the reason for lower unemployment. The position of the energy (oil and gas) sector in the economy will however gradually decline and will remain subject to low raw material prices. Inflation is expected to increase in 2017 as a result of the slow rise in oil prices alongside higher wages. The Danish Central Bank’s relaxed monetary policy (policy interest rates: 0%; deposit rates: -0.65% since February 2015) is likely to continue in the short term bearing in mind the low level of inflation, and the pegging of the Danish krone to the euro. This policy has in particular enabled the maintenance of the competitiveness of its exports whilst helping sustain the domestic demand.

Given the low level of unemployment, government policy is not expected to focus on boosting activity through employment. The government will thus continue its prudent budget policy aimed at avoiding potential labor shortages in certain sectors. Nevertheless, any increase in the public deficit in 2017 will be due to a falling off of tax receipts arising from the Pension Yield Tax on pension providers’ added-values, which were at a particularly high level in 2016. Public expenditure will fall slightly but still remain at a high level. The 2017 budget however includes measures aimed at improving the healthcare system and the collection of taxes, as well as boosting aid for refugees and displaced persons from conflict zones (particularly the Middle East). The deficit as well as the public debt will therefore remain well below the threshold defined by the European Stability and Growth Pact (respectively 3% and 60% of GDP). The current account surplus will hold steady in 2017. This will be due mainly to the vitality of exports, boosted by the past depreciation of the krone pegged to the euro, which will offset the consumption driven rise in imports. Exports of agricultural products (pork, milk) will be the most dynamic, mainly towards Asian countries and Germany. Machines and transport equipment will also feature among the leading exports, alongside chemical (biotechnology) products. Brexit however could have a negative impact on exports as a result of declining demand in the United Kingdom (3rd biggest export market) and thus reduce the country’s current account surplus.

Lars Løkke Rasmussen was elected Prime Minister in the parliamentary elections in June 2015, with a four year term of office. The right-wing grouping (including all the right-wing parties such as Venstre, the Prime Minister’s party, and the extreme right of the Danish People’s Party (DPP)), won a majority in parliament against the left grouping including in particular the Social Democrats (SD). The liberal party (Venstre), which heads the government, holds only 34 of the 179 seats in Parliament. The significant disagreements between the various right-wing coalition parties does not leave the Prime Minister much room for maneuver in carrying out reforms. The far-right party (DPP) does not support the government’s strategic growth plan (2017-2025) which includes a reduction in taxes on companies and high incomes. The continuation of these disagreements could result in early elections as of 2017. The business climate in the country will be very positive and ranks third in the Doing Business 2017 survey behind New Zealand and Singapore.