## IMF Executive Board Concludes 2025 Article IV Consultation with Denmark _IMF News, July 3, 2025_ ## Source details **Canonical URL:** [IMF Executive Board Concludes 2025 Article IV Consultation with Denmark](https://www.imf.org/en/news/articles/2025/07/02/pr-25236-denmark-imf-executive-board-concludes-2025-article-iv-consultation-with-denmark) ## Other formats - [Markdown version](/en/news/articles/2025/07/02/pr-25236-denmark-imf-executive-board-concludes-2025-article-iv-consultation-with-denmark/index.md) - [Structured JSON version](/en/news/articles/2025/07/02/pr-25236-denmark-imf-executive-board-concludes-2025-article-iv-consultation-with-denmark/index.json) - [Bundle manifest](/en/news/articles/2025/07/02/pr-25236-denmark-imf-executive-board-concludes-2025-article-iv-consultation-with-denmark/bundle-manifest.json) ## Bibliographic details - Published: July 3, 2025 --- ### Key messages and overview - The Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation for Denmark and considered and endorsed the staff appraisal without a meeting on a lapse of time basis. - Strong growth has continued, primarily driven by pharmaceutical exports; domestic demand has been relatively sluggish. - Inflation has remained below 2 percent. - Public finances and external positions are robust, and the financial system has demonstrated resilience to multiple shocks in recent years. - The policy priority is to uphold fiscal sustainability amid rising defense and aging-related expenditures, ensure financial stability, and further intensify structural reforms to support high levels of income and sustain the welfare state. ### Growth outlook and risks - Output growth: - 2024: 3.7 percent - 2025: 3.0 percent (expected) - 2026: 1.8 percent (expected) - Drivers and near-term factors: - Continued expansion of pharmaceutical exports has been a primary driver. - The full reopening of the Tyra natural gas and oil field, which operated at reduced capacity last year following maintenance, will provide a temporary boost in 2025. - Exports growth, including pharmaceutical exports, is expected to slow as the exceptional pharmaceutical expansion begins to normalize. - External risks: - Reversal of globalization, including higher trade barriers and deepening geoeconomic fragmentation, dominates the outlook. - The U.S. is a key trading partner; a significant portion of Danish exports to the U.S. consists of merchanting and processing, while exports of goods produced in Denmark passing through customs make up only 3 percent of total exports, limiting the direct impact of U.S. tariffs on the Danish economy. - Medium-term projection: - Growth is projected at around 1.5 percent, assuming a maturing pharmaceutical sector and a declining working-age population. ### Executive Board assessment of macroeconomic position - Denmark’s institutions, economic structure, fiscal position, and workforce reinforce resilience to external shocks. - Staff assesses Denmark’s external balance is stronger than the level implied by medium-term fundamentals and desirable policies. - Labor market pressures have eased; inflation anticipated to stay around 2 percent. - Although fiscal position is strong, significantly higher and more persistent increases in defense spending would require adjustment measures to ensure long-term fiscal sustainability. - The structural balance floor of -1 percent of GDP under current national fiscal rules should be respected. ### Fiscal policy guidance - Adjustment measures to address higher defense and aging-related expenditures should be growth-friendly and ensure fairness to preserve the welfare state. - Explore both expenditure and revenue measures; given the already high tax burden, adjustments could come more from spending than revenue measures. - Structural reform efforts should enhance labor supply and income levels to generate revenues. ### Financial sector and macroprudential policy - Systemic risks are contained; banks are well-capitalized, with strong profitability, asset quality, and liquidity. - Recommendations to strengthen financial resilience: - Thoroughly examine banks‘ modeling practices of International Financial Reporting Standards 9 to ensure robust credit risk provisioning. - Complete the review of internal ratings-based models. - Implement the EU’s CRR III/CRD VI as planned. - Enhance resilience against cyberattacks. - Ensure adequate staffing of the Financial Supervisory Authority. - Nonbank financial institutions (NBFIs): - Given their considerable size, extensive interconnectedness, and susceptibility to market vulnerabilities, continue strengthening the oversight framework for NBFIs. - Anti-Money Laundering/Countering the Financing of Terrorism: - Continue efforts to further strengthen the framework given elevated geopolitical risks and evolving threats. - Macroprudential stance: - Capital-based macroprudential policy is broadly appropriate. - Borrower-based measures should be tightened to address pockets of vulnerabilities. - Maintain the 2.5 percent countercyclical capital buffer. - Maintain the 7 percent sector-specific systemic risk buffer. - Consider lowering the maximum loan-to-value ratio below the current 95 percent. - Reduce incentives for larger mortgages by lowering the tax deductibility of mortgage interest expenses. ### Structural reform priorities - Intensify structural reforms to sustain high income levels, preserve fiscal space, and sustain the welfare state. - Key reform areas: - Strengthen policies to support entrepreneurship. - Harness the benefits of digitalization and Artificial Intelligence (AI). - Reduce regulatory burdens on businesses while balancing costs and benefits. - Ensure sufficient labor supply with the right skills, such as IT, health, and long-term care professionals. - Deepen the EU single market to enhance business dynamism and potential growth. - Denmark’s commitment to supporting multilateral and transparent trade policies is noted positively. ### Climate adaptation and resilience - Denmark is particularly vulnerable to sea level rise, storm surges, and coastal erosion, necessitating a well-designed long-term adaptation plan. - National Climate Adaptation Plan II focuses on: - Enhanced coastal and groundwater protection. - Urban flood management. - Assessment of infrastructure needs, including financing responsibilities among central and local governments and the private sector. - Authorities are encouraged to reform the property insurance scheme (“Storm Surge Scheme”) to make insurance premiums risk-based. ### Denmark: Selected Economic Indicators (selected entries) - Output - Real GDP growth (%): 2024: 3.7; 2025 (Projections): 3.0; 2026 (Projections): 1.8 - Employment - Unemployment rate (%): 2024: 2.9 - Prices - Inflation (%, average): 2024: 1.3; 2025 (Projections): 2.0; 2026 (Projections): 1.9 - General Government Finances - Revenue (% GDP): 2024: 51.0; 2025 (Projections): 50.0; 2026 (Projections): 50.4 - Expenditures (% GDP): 2024: 46.5; 2025 (Projections): 48.4; 2026 (Projections): 48.9 - Fiscal balance (% GDP): 2024: 4.5; 2025 (Projections): 1.6; 2026 (Projections): 1.5 - Structural balance (% potential GDP): 2024: 0.7; 2025 (Projections): 0.3 - Public debt (% GDP): 2024: 31.1; 2025 (Projections): 29.3; 2026 (Projections): 28.0 - Money and Credit - Domestic credit growth (%): 2024: 2.7; 2025 (Projections): 4.3; 2026 (Projections): 3.3 - 3-month interbank interest rate (%): 2024: 3.5; 2025 (Projections): 2.5; 2026 (Projections): 2.3 - 10-year government bond yield (%): 2024: 2.6 - Balance of Payments - Current account (% GDP): 2024: 12.1; 2025 (Projections): 11.4; 2026 (Projections): 11.2 - International reserves (% change): 2024: 0.4 - Exchange Rate - ULC-based REER (% change): 2024: -2.1 *Source: Press Release No. 25/236, IMF Communications Department, July 3, 2025.* --- ## References - [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/) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2025/07/02/pr-25236-denmark-imf-executive-board-concludes-2025-article-iv-consultation-with-denmark_