IMF Staff Country Reports

The 2023 Article IV Consultation discusses that the Danish economy recovered strongly from the pandemic. Economic activity is set to soften in the first half of 2023, followed by a gradual recovery. Denmark’s recovery from the pandemic was impressive, but strong output and employment growth has contributed to inflationary pressures. Gross domestic product growth is expected to slow in 2023, while inflation will remain elevated in the near term. Risks to growth are broadly balanced while upside risks dominate inflation. Near-term fiscal policy should support disinflation, given persistently elevated inflation. There is uncertainty regarding the contractionary effects assumed in the fiscal plan, while positive output gaps and high inflation are expected in the near term. Medium-term fiscal policy should be recalibrated as needed to adhere to the fiscal rules. The structural balance will weaken to a deficit over the medium term mainly due to defense and demographic-related spending.