Denmark’s Winter Lockdown Prompts 2021 Growth Outlook Cut

Denmark cut its economic growth forecast for the second time in five months after a lockdown to fight the virus spread over the winter delayed the recovery in the Nordic country.

The government in Copenhagen cut its gross domestic product outlook for this year to 2.1%, down from its December estimate of 2.8%, the finance ministry said in a statement on Thursday. It now expects a higher jump in 2022, at 3.8%. Bloomberg News reported the data earlier, based on documents it had seen.

Like the rest of the Nordic region, Denmark has fared better through the second wave of the pandemic than many European peers. Still, a rebound after the first lockdown in 2020 was halted when a rapid rise in confirmed cases of Covid-19 before Christmas made the government shut down retail and schools.

“The pandemic has led to a deep setback for the Danish economy,” the ministry said. “The lockdown during the winter and the changed behavior of Danes have led to a temporary decline in activity, but not to the same extent as was the case during the lockdown last spring.”

While others combat an up-tick in contamination figures, Denmark has started reopening shops and restaurants after months with a steady level of confirmed cases. Retail sales surged an annual 24% last month, the most on record, driven by clothing. The 2022 forecast suggests that the country is headed for its highest GDP growth in 15 years. The development looks to be much better than in the aftermath of the financial crisis, the ministry said according to the document.

House prices in Denmark, in particular in major cities, are projected to rise more than 10% this year. Finance Minister Nicolai Wammen said the government is monitoring the real estate development “closely” as a part of its efforts to prevent a so-called K-shaped recovery.

“I want a recovery where everyone is included,” Wammen told reporters. “The development we see on the real estate market makes it more difficult for families to buy a home, but it’s important to mention that the rise in prices this time is mainly driven by low interest rates and solid private incomes.”

Key figures20212022
GDP2.1%3.8%
Private Consumption2.4%4.4%
Exports4.2%6.7%
Debt/GDP40.7%41.3%
Public balance/GDP-3.3%-0.9%
House Prices10.4%3.2%

©2021 Bloomberg L.P.

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