Danish Watchdog Urges Government to Tighten 2022 Spending More

(Bloomberg) --

Denmark’s government should cut more spending in its 2022 budget to prevent the “booming” economy from overheating, according to its fiscal policy watchdog.

The Economic Councils, often dubbed the Wise Men, raised its 2021 gross domestic product growth forecast to 3.9% versus 2.9% in the spring, reflecting a swift return to pre-pandemic state after ending all economic lockdowns earlier this year. The planned tightening of fiscal policy isn’t enough, the advisory body said in a statement on Tuesday.

“A significant part of the tightening is due to the ending of corona-related expenses, and compared to the situation before the pandemic the planned fiscal policy in 2022 is expansive,” it said.

The Nordic economy was almost 2% above its pre-pandemic level at the end of the second quarter, having weathered the crisis better than most other developed economies. Denmark, which has one of the highest vaccination rates in the world, ended its last restrictions last month after bringing the spread of the virus under control. 

The government of Premier Mette Frederiksen in August forecast next year’s budget surplus at 0.4% of GDP, following a 1.9% gap this year.

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