The recovery of the Danish economy continues. GDP growth is expected to increase from almost 1 per cent in 2016 to 1.5 per cent in 2017 and 1.7 per cent in 2018. In line with economic growth, employment is expected to increase by a further 50,000 persons in the course of 2017 and 2018 after a marked increase in the order of 45,000 persons this year.
With growth in production and a solid increase in employment in recent years, the Danish economy is approaching a situation of potential capacity constraints. Unemployment is already at the lowest level in 40 years, except for the years 2007 and 2008 when bottlenecks in the labour market were widespread, and unemployment is expected to decline further.
Already now, there are signs of emerging capacity constraints, which could slow economic growth down later in the cycle. The recovery and employment growth could, however, be extended if new initiatives to increase labour supply and strengthen growth potential are implemented.
The Minister for Economic Affairs and the Interior Simon Emil Ammitzbøll says:
The government’s forecast for the Danish economy shows that we are heading towards a new era. Things are moving forward, but it requires that we adjust. The government has set itself the objective to pursue policies that increase employment significantly and increase prosperity in Denmark. We will present proposals, which lower taxes on labour, increase the incentive to find a job, and make it easier to do business in Denmark. This will create the foundation for a good development. I’m already looking forward to present the next survey of the Danish economy in May 2017.
The economic improvement and a tighter labour market are calling for an appropriate economic policy. To support a sustainable recovery which does not lead to imbalances, there is a need of initiatives that will help reducing capacity pressure on capacity and bringing public finances back towards balance. This should also be seen in light of a still very accommodative monetary policy.
The Minister of Finance Kristian Jensen says:
If we seriously want to have sustainable growth, we must mobilize all resources. It is not acceptable that the recovery risks coming to a halt after a short time, because companies will be short of labour, and also because public spending still make up a large share of the economy. To support that the recovery does not lead to imbalances, there is a need in the coming years for both increasing the capacity of the economy through new reforms and at the same time keeping public spending on a tight leash. Otherwise we risk that the recovery is slowing down too early. Therefore, we must succeed in finding more hands for the labour market.
Read more about Economic Survey, December 2016.
Read more about Public Finances, December 2016.