Danish Ministry of Finance lowers economic outlook for 2016 and 2017, public finances deficit to narrow

The Danish Ministry of Finance has changed its outlook for Denmark’s economy. According to its latest projections, the Danish economy is expected to expand 1.1% in 2016 and 1.7% in 2017, revised downward from its earlier forecast of 1.9% and 2% in 2016 and 2017 respectively. The new forecasts are almost consistent with Nordea Bank’s projections.

Meanwhile, the Danish Ministry of Finance projects public finances deficit to be DKK 9.9 billion lower than anticipated in December 2015, in spite of declining growth outlook. In 2016, Denmark’s public finances deficit is expected to reach DKK 46.7 billion, as compared with earlier projection of DKK 56.6 billion.

The lower deficit outlook is unlikely to impact the central bank’s plan for the government debt policy in the beginning, according to Nordea Bank. Under the central bank’s present strategy, the target for Danish government bond issuance is DKK 75 billion in 2016. But this strategy includes a likely reduction of DKK 53 billion on the government’s account with the central bank.

If the Danish government is successful in reducing deficit, it is expected to lead to an additional moderate reduction in government reserves than anticipated earlier, said Nordea Bank.