Denmark’s Economy Predicted to Grow in 2015

Denmark experienced economic difficulty in 2014 and ended the year with growth falling to .75% from an estimated 1.4% in December. Predictions for 2015 also took a turn, moving to 1.5% from an earlier estimate of 2.0%.

Falling demand is the primary reason for reduced growth.  Danish households and companies were less likely to consume and invest.  Consumption slumped as Danes began paying off debts accumulated in the wake of the burst housing bubble. However, household finances are now beginning to balance out.

Denmark experienced economic difficulty in 2014 and ended the year with growth falling to .75% from an estimated 1.4% in December. Predictions for 2015 also took a turn, moving to 1.5% from an earlier estimate of 2.0%.

Falling demand is the primary reason for reduced growth.  Danish households and companies were less likely to consume and invest.  Consumption slumped as Danes began paying off debts accumulated in the wake of the burst housing bubble. However, household finances are now beginning to balance out.

Comparing Denmark

One of the largest financial enterprises in the region, Danske Bank, released an outlook report recently that suggests the Danish economy is actually performing far better than its Scandinavian neighbors. The bank did argue, however, that potential deflation along with falling oil prices could have a negative effect on the Scandinavian economy that had previously pushed through the storm caused by the global banking crisis.

Although Nordic countries have been relatively strong in the recent years, avoiding much of the financial crisis that is taking place in Europe, the shine seems to be wearing off. The recession in Russia hit Finland hard.  In Denmark however, Danske bank commented that the economy could be moving in the right direction despite its government run health system eating into its GDP.

Growth in Denmark

Denmark’s GDP was positive in 2014, the first year of growth since 2011. Consumption appears to be finally picking up once again, and home prices are increasing. What’s more, despite the drop in oil prices, growth forecasts have a good chance of materializing.  Although Norway is feeling the impact of falling oil prices, Danske bank suggested that the price decline could actually improve Denmark’s economy by as much as 0.4 percentage points. However, though lower oil prices could be good for the Danish economy, they could actually be damaging to the government’s budget.

The budget needs to sell oil from the North Sea at $110 a barrel this year, which is looking increasingly unlikely. Oil prices have already fallen below $50 per barrel, making most consumers in the world very happy.  They would be even lower if America’s federal government allowed fracking on federal lands.

Denmark is Surviving, but not Thriving

According to Danske bank, it is likely that private consumption will have the biggest impact on Denmark’s economic growth in the next few years.  The current estimate is 1.6% for 2015 and 2.0% for 2016. This means that the bank’s prediction is slightly lower than the European Commission’s 1.7% estimate.  Although growth in Norway and Sweden has slowed in recent months, the bank still estimated 1.7% and 1.8% growth for each country, respectively over 2015 and 2016.