Cost of Virus Lockdown Revealed in Grim Forecast From Denmark

(Bloomberg) --

One of Europe’s first countries to plot a path back to normalcy from Covid-19 has now calculated the economic cost of a protracted lockdown, versus an early resumption of activity.

After shuttering Denmark a month ago -- earlier than most European states -- Prime Minister Mette Frederiksen recently enacted plans to reopen parts of the economy next week. On Thursday, her Finance Ministry provided some numbers to show what that might mean.

No matter what, it’s clear the economic pain will be severe. Denmark is headed for one of its “darkest chapters,” Finance Minister Nicolai Wammen said at a press briefing on Thursday.

An early return to normal means GDP will shrink about 3% this year, according to the finance ministry. A more gradual resumption of economic activity would result in a 4.4% contraction, while a “limited” return would spell a 6% contraction. Before the government suggested relaxing its lockdown after Easter, the central bank had estimated GDP may slump as much as 10%.

Read More: Denmark Attempts Return From Virus Lockdown After Early Response

The Social Democrat government has already pledged over $40 billion in emergency measures to help the economy cope with the lockdown enforced to stem the spread of the virus. On Thursday, Wammen said there’ll be an extra 35 billion kroner ($5 billion) made available to small and mid-sized businesses.

Denmark was one of the first European countries to respond to Covid-19 by shutting schools, restaurants and cafes, as part of social distancing requirements.

Frederiksen said on Monday the country’s early response was the key to its comparatively stable rate of infections. As a result, the government has judged that it’s safe for many schools to open again next week, and talks are set to start with business leaders on how best to phase in a resumption of normal office work.

Here are the three economic scenarios set out by the government:

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