Danish Central Bank Sees Risk of Slow Recovery From Crisis

(Bloomberg) --

Denmark’s central bank warned of the risk of a slow recovery from the historic recession triggered by Covid-19.

Gross domestic product will contract 4.1% this year, the Copenhagen-based bank said on Wednesday. It expects growth of 4.2% in 2021.

“Over a few months, national lockdowns have caused unemployment to soar –- in some countries to record levels,” Governor Lars Rohde said. “The risk of a prolonged economic recovery is considerable.”

Denmark was one of the first countries in Europe to shut down its economy back in mid-March. The strategy has coincided with a sharp drop in the Covid-19 contagion rate, paving the way for a swift unwinding of restrictions on movement.

Read More:

  • Danish Central Bank Says Credit Growth Stable Despite Crisis
  • Denmark Gets ‘Incredibly’ Cheap Funding from CP Sale, Rohde Says
  • Denmark to Benefit from EU Recovery Package, Governor Rohde Says

The central bank’s latest forecast is less pessimistic than its prediction in April, when it saw GDP contracting 10% in a worst-case scenario.

Denmark’s government has announced aid measures equivalent to more than $75 billion, and is now slowly winding down parts of its emergency program.

“The fiscal stimulus agreed in the Parliament contributes to a more smooth business cycle when the relief packages are terminated,” Rohde said. “If the recovery becomes weaker than expected, further easing may be needed next year and the year after.”

Real growth from year before2019202020212022
GDP (%)+2.4-4.1+4.2+1.6
Public balance as % of GDP+3.7-5.8-2.0-1.8
Consumer prices YoY (%)+0.7+0.2+0.9+1.2
House prices YoY (%)+3-2.3+2+5.4

©2020 Bloomberg L.P.

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