Danish economic growth rebounds in Q4 2017, economy to continue on solid growth path in years ahead

Denmark’s economy grows in the whole of 2017 at the highest rate in the past 11 years. This is expected to continue in 2018.

The Danish economy expanded 1 percent on a sequential basis in the fourth quarter. However, this solid growth should be seen in the light of a very subdued third quarter, mainly because of stockbuilding and lower car sales because of changed taxation.

This strong recovery in the fourth quarter suggests that the Danish economy for the whole of 2017 expanded by 2.1 percent, the highest since 2006. With the high activity level, the labor market tightened for the fourth straight year and now, for the first time in ten years, the economy is running at full capacity.

In the fourth quarter, private consumption contributed 0.6 percentage points to the quarterly GDP growth, mainly as a consequence of a solid recovery in car sales. Stripping cars, private consumption rose just marginally. The high number of sold cars also stimulated import, which expanded 2.5 percent quarter-on-quarter, and thus total net export negatively contributed 0.5 percentage points in spite of solid export growth. After a large decline in the third quarter, inventories recovered in the fourth quarter, adding 0.9 percentage points to GDP.

Moreover, the earlier data was revised. The first quarter 2017 growth data was upwardly revised by 1.6 percentage points. The second quarter data, on the other hand, was downwardly revised by 1.8 percentage points and the third quarter data was revised down by 0.3 percentage points. Statistics Denmark stated that the very large revisions to the first and second quarter were mainly due to a foreign payment to Danish company for the rights to use a patent.

“We expect the Danish economy to continue on a strong growth path in the coming years; however, as the competition for economic resources intensifies, it will become increasingly difficult to maintain growth at this level. Thus, we look for growth of 1.9 percent in 2018 and 1.7 percent in 2019”, noted Nordea Bank in a research report.

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