{
  "title": "IMF Executive Board Concludes 2022 Article IV Consultation with Denmark",
  "publication": "IMF News, June 15, 2022",
  "sourceUrl": "https://www.imf.org/en/news/articles/2022/06/15/pr22197-imf-executive-board-concludes-2022-article-iv-consultation-with-denmark",
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  "summary": "IMF Executive Board Concludes 2022 Article IV Consultation with Denmark",
  "publishDate": "2022-06-15",
  "sections": [
    {
      "heading": "Economic recovery and near-term outlook",
      "content": "- Denmark’s economic activity has rebounded above pre-pandemic levels, led by strong domestic demand.\n- Private consumption normalized amid easing of containment measures; investment remained solid; public consumption continued to support activity.\n- Near-term growth is projected at 3.2 percent in 2022 and 1.5 percent in 2023.\n- Lower demand from main trading partners—notably Germany—will weigh on Danish exports.\n- Public consumption is expected to retreat as the unwinding of COVID-support measures more than offsets war-related spending."
    },
    {
      "heading": "Inflation, energy prices, and risks to the outlook",
      "content": "- Inflation was propelled to a historic high by soaring energy prices and labor market pressures.\n- Headline inflation is projected to rise appreciably in 2022—close to 5 percent—mainly due to surging energy prices.\n- Balance of risks is tilted to the downside:\n  - Key downside risks: further escalation of the war in Ukraine; pandemic-related risks including new variants; high and increasing household debt with elevated housing valuations.\n  - Key upside risk: further labor market pressures related to a faster-than-expected rebound."
    },
    {
      "heading": "Executive Board assessment and policy stance",
      "content": "- Directors welcomed the authorities’ swift and well-calibrated pandemic response that facilitated a strong recovery.\n- Directors encouraged retaining policy flexibility while preserving macro-financial stability and supporting sustainable, inclusive growth.\n- Given cyclical pressures, Directors agreed with the planned fiscal tightening in 2022 but underscored the importance of retaining flexibility and recalibrating policies as needed.\n- Directors commended the authorities’ energy compensation scheme as small, temporary, and targeted; any additional measures should also be targeted and fiscally neutral.\n- Directors agreed the exchange rate peg has served Denmark well and that monetary policy should stand ready to maintain it."
    },
    {
      "heading": "Fiscal and public finance outlook (selected messages)",
      "content": "- Planned fiscal tightening in 2022 is appropriate given cyclical pressures; flexibility should be preserved to respond to risks.\n- Key public finance figures (percent of GDP, as presented):\n  - Gross national saving: 30.8 (2019), 31.1 (2020), 31.6 (2021), 31.4 (2022), 31.2 (2023), 31.0? (note: only values through 2023 explicitly listed in table).\n  - Gross domestic investment: 22.0 (2019), 22.9 (2020), 23.3 (2021), 24.2 (2022), 24.3 (2023), 24.4 (2024), 24.6 (2025), 24.7 (2026).\n  - Total revenues (percent of GDP): 53.6 (2019), 53.3 (2020), 51.5 (2021), 51.1 (2022), 50.6 (2023), 50.0 (2024), 49.9 (2025), 49.8 (2026).\n  - Total expenditures (percent of GDP): 49.5 (2019), 53.4 (2020), 51.0 (2021), 50.5 (2022), 50.4 (2023).\n  - Overall balance (percent of GDP): 4.1 (2019), -0.2 (2020), 1.1 (2021).\n  - Gross debt (percent of GDP): 33.6 (2019), 42.1 (2020), 36.7 (2021), 32.3 (2022), 33.1 (2023), 32.9 (2024), 32.8 (2025), 32.7 (2026)."
    },
    {
      "heading": "Financial sector, housing, and macroprudential recommendations",
      "content": "- Directors commended the resilience of the banking system.\n- Recommended implementation of additional prudential tools, including:\n  - Revisiting sectoral systemic risk buffers.\n  - Introducing a fully risk-based prudential framework.\n- Risks from the housing market noted: high household leverage and increases in risky mortgages.\n- Recommended macroprudential tightening together with structural reforms to increase supply of affordable housing and strengthen the tax code.\n- Specific borrower- and mortgage-related recommendations:\n  - New mortgages extended to highly-leveraged households should be subject to minimum down-payment requirements or mandatory amortization until a minimum equity share is reached.\n  - Reduce mortgage interest deductibility.\n  - Introduce borrower-based tools."
    },
    {
      "heading": "Labor market and structural reform advice",
      "content": "- Directors supported labor market reforms that improved employment prospects of the young, the low-skilled, and the foreign-born.\n- To ensure adequate labor supply, any changes to indexation of the statutory retirement age to life-expectancy should be consistent with long-term fiscal sustainability.\n- Recommended reducing labor taxes.\n- Commended Denmark’s ambitious green and digital transformation plans; a prompt decision on carbon pricing would further incentivize private-sector green investment.\n- To boost productivity growth, recommended:\n  - Enabling high productivity sectors to expand by encouraging broad-based innovation.\n  - Improving access to equity finance and accelerator capital.\n  - Rebalancing taxation."
    },
    {
      "heading": "Selected economic indicators, 2019–27 (key series, as published)",
      "content": "- Real GDP (change in percent): 2.1 (2019), -2.1 (2020), 4.7 (2021), 3.2 (2022), 1.5 (2023), 1.8 (2024).\n- Final domestic demand (change in percent): 1.0 (2019), 0.0 (2020), 4.3 (2021), 2.8 (2022), 1.9 (2023).\n- Private consumption (change in percent): 1.2 (2019), -1.3 (2020), 4.2 (2021), 3.6 (2022), 2.3 (2023), 2.2 (2024).\n- Public consumption (change in percent): -1.7 (2019), 3.7 (2020), 0.3 (2021), 0.9 (2022).\n- Gross fixed investment (change in percent): 0.1 (2019), 5.1 (2020), 5.6 (2021), 3.8 (2022), 2.7 (2023), 3.0 (2024).\n- Output gap (percent of potential output): 1.6 (2019), 0.6 (2020), 0.5 (2021).\n- Harmonized unemployment rate (percent): 5.0 (2019), 5.7 (2020).\n- GDP deflator (change in percent): 0.7 (2019), 2.6 (2020), 2.4 (2021), 4.4 (2022), 2.0 (2023).\n- CPI (year average): 4.8 (value year not explicitly matched in table).\n- Domestic credit growth (end of year): 1.3 (2019), 3.1 (2020).\n- M3 growth (end of year): 12.3 (2019), -0.9 (2020).\n- Trade balance, goods and services (percent of GDP): 7.4 (2019), 6.5 (2020), 6.7 (2021), 6.3 (2022), 6.1 (2023), 5.9 (2024).\n- Exports of goods & services (percent of GDP): 59.0 (2019), 54.9 (2020), 59.6 (2021), 61.8 (2022), 62.0 (2023), 61.9 (2024), 61.7 (2025), 61.6 (2026), 61.3 (2027).\n- Imports of goods & services (percent of GDP): 51.6 (2019), 48.4 (2020), 52.9 (2021), 55.5 (2022), 55.9 (2023), 56.0 (2024), 55.7 (2025).\n- Current account (percent of GDP): 8.8 (2019), 8.1 (2020), 8.3 (2021), 7.1 (2022), 6.9 (2023), 6.6 (2024).\n- Nominal GDP (Bln DKK): 2318 (2019), 2330 (2020), 2497 (2021), 2690 (2022), 2787 (2023), 2894 (2024), 3008 (2025), 3128 (2026), 3254 (2027).\n- GDP (Bln USD): 348 (2019), 356 (2020), 397 (2021).\n- GDP per capita (USD): 59862 (2019), 61154 (2020), 67997 (2021).\n\nIMF Press Release No. 22/197, June 15, 2022.\n\n---\n\n\n References\n\n- Denmark and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.IMF.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2022/06/15/pr22197-imf-executive-board-concludes-2022-article-iv-consultation-with-denmark"
    }
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    "Published: June 15, 2022",
    "Denmark’s economic activity has rebounded above pre-pandemic levels, led by strong domestic demand.",
    "Private consumption normalized amid easing of containment measures; investment remained solid; public consumption continued to support activity.",
    "Near-term growth is projected at 3.2 percent in 2022 and 1.5 percent in 2023.",
    "Lower demand from main trading partners—notably Germany—will weigh on Danish exports.",
    "Public consumption is expected to retreat as the unwinding of COVID-support measures more than offsets war-related spending.",
    "Inflation was propelled to a historic high by soaring energy prices and labor market pressures.",
    "Headline inflation is projected to rise appreciably in 2022—close to 5 percent—mainly due to surging energy prices.",
    "Balance of risks is tilted to the downside:",
    "Directors welcomed the authorities’ swift and well-calibrated pandemic response that facilitated a strong recovery.",
    "Directors encouraged retaining policy flexibility while preserving macro-financial stability and supporting sustainable, inclusive growth.",
    "Given cyclical pressures, Directors agreed with the planned fiscal tightening in 2022 but underscored the importance of retaining flexibility and recalibrating policies as needed.",
    "Directors commended the authorities’ energy compensation scheme as small, temporary, and targeted; any additional measures should also be targeted and fiscally neutral.",
    "Directors agreed the exchange rate peg has served Denmark well and that monetary policy should stand ready to maintain it.",
    "Planned fiscal tightening in 2022 is appropriate given cyclical pressures; flexibility should be preserved to respond to risks.",
    "Key public finance figures (percent of GDP, as presented):",
    "Directors commended the resilience of the banking system.",
    "Recommended implementation of additional prudential tools, including:",
    "Risks from the housing market noted: high household leverage and increases in risky mortgages.",
    "Recommended macroprudential tightening together with structural reforms to increase supply of affordable housing and strengthen the tax code.",
    "Specific borrower- and mortgage-related recommendations:",
    "Directors supported labor market reforms that improved employment prospects of the young, the low-skilled, and the foreign-born.",
    "To ensure adequate labor supply, any changes to indexation of the statutory retirement age to life-expectancy should be consistent with long-term fiscal sustainability.",
    "Recommended reducing labor taxes.",
    "Commended Denmark’s ambitious green and digital transformation plans; a prompt decision on carbon pricing would further incentivize private-sector green investment.",
    "To boost productivity growth, recommended:",
    "Real GDP (change in percent): 2.1 (2019), -2.1 (2020), 4.7 (2021), 3.2 (2022), 1.5 (2023), 1.8 (2024).",
    "Final domestic demand (change in percent): 1.0 (2019), 0.0 (2020), 4.3 (2021), 2.8 (2022), 1.9 (2023).",
    "Private consumption (change in percent): 1.2 (2019), -1.3 (2020), 4.2 (2021), 3.6 (2022), 2.3 (2023), 2.2 (2024).",
    "Public consumption (change in percent): -1.7 (2019), 3.7 (2020), 0.3 (2021), 0.9 (2022).",
    "Gross fixed investment (change in percent): 0.1 (2019), 5.1 (2020), 5.6 (2021), 3.8 (2022), 2.7 (2023), 3.0 (2024).",
    "Output gap (percent of potential output): 1.6 (2019), 0.6 (2020), 0.5 (2021).",
    "Harmonized unemployment rate (percent): 5.0 (2019), 5.7 (2020).",
    "GDP deflator (change in percent): 0.7 (2019), 2.6 (2020), 2.4 (2021), 4.4 (2022), 2.0 (2023).",
    "CPI (year average): 4.8 (value year not explicitly matched in table).",
    "Domestic credit growth (end of year): 1.3 (2019), 3.1 (2020).",
    "M3 growth (end of year): 12.3 (2019), -0.9 (2020).",
    "Trade balance, goods and services (percent of GDP): 7.4 (2019), 6.5 (2020), 6.7 (2021), 6.3 (2022), 6.1 (2023), 5.9 (2024).",
    "Exports of goods & services (percent of GDP): 59.0 (2019), 54.9 (2020), 59.6 (2021), 61.8 (2022), 62.0 (2023), 61.9 (2024), 61.7 (2025), 61.6 (2026), 61.3 (2027).",
    "Imports of goods & services (percent of GDP): 51.6 (2019), 48.4 (2020), 52.9 (2021), 55.5 (2022), 55.9 (2023), 56.0 (2024), 55.7 (2025).",
    "Current account (percent of GDP): 8.8 (2019), 8.1 (2020), 8.3 (2021), 7.1 (2022), 6.9 (2023), 6.6 (2024).",
    "Nominal GDP (Bln DKK): 2318 (2019), 2330 (2020), 2497 (2021), 2690 (2022), 2787 (2023), 2894 (2024), 3008 (2025), 3128 (2026), 3254 (2027).",
    "GDP (Bln USD): 348 (2019), 356 (2020), 397 (2021).",
    "GDP per capita (USD): 59862 (2019), 61154 (2020), 67997 (2021).",
    "[Denmark and the IMF](http://www.imf.org/external/country/DNK/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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