Country Report Denmark January 2009

Outlook for 2009-10

• The minority Liberal-Conservative government's main short-term policy priorities will be to ensure the stability of Denmark's financial institutions and to alleviate the effects of a sharp economic downturn.
• The downturn should make it easier to reach a political agreement on a tax reform, but the government is likely to fail to drive through reforms to the welfare system aimed at ensuring medium-term fiscal sustainability.
• The government has again raised the possibility of holding a referendum on whether to join the euro area. A vote in 2009 still seems unlikely given the absence of a broad political consensus in favour of a "yes" vote.
• Fiscal policy will be expansionary. Public investment is set to rise. Income tax for low- and middle-income earners was cut at the beginning of 2009. The government will seek to reduce the top rate of income tax in 2010.
• The Nationalbank (the central bank) will reduce interest rates during 2009, although it will maintain a positive differential with comparable euro area rates if this is necessary to protect the krone's peg to the euro.
• The Economist Intelligence Unit has downgraded its forecasts for global growth. As a result, we have cut our forecast for Danish real GDP. We now expect GDP to contract by 2.5% in 2009, with growth stagnant in 2010.

Monthly review

• In early December 2008 parliament passed the 2009 state budget with the votes of all parties except the small, left-wing Red-Green Alliance. Pressure is already building for additional measures to combat the economic downturn.
• The Ministry of Transport and the Ministry of Finance published a long-term transport strategy on December 8th that promises the development of high-speed rail lines and the introduction of road pricing.
• The global financial crisis has altered the government's economic policy priorities. The prime minister has highlighted the need for a greater fiscal stimulus. The government is working on a second bank-rescue package.
• The Nationalbank (central bank) released its latest twice-yearly Financial Stability Report in December 2008, predicting further bank failures in 2009.
• Official interest rates were reduced further in December 2008 and January 2009, although the central bank maintained a positive differential with euro area rates to ensure the stability of the krone's peg to the euro.
• Registrations of new passenger cars fell by 45% year on year in November 2008. Industrial production contracted sharply. The number of bankruptcies rose to its highest level since records began in 2008.

Source: Country Report

This report covers the following industry codes:
SIC Code: 49;60;39
NAICS Code: 22;52;31

This report covers the following industry codes:
SIC Code: 49;60;39
NAICS Code: 22;52;31