Denmark May Cut Economic Outlook Amid Brexit, Trade War Threat

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Danes may be facing a gloomier economic outlook by the end of the year as the list of global threats grows more ominous.

The country’s finance minister, Nicolai Wammen, told reporters there’s a possibility the next economic forecast he presents will be “gloomier” than the numbers he unveiled in Copenhagen on Tuesday. For now, his ministry predicts the economy will grow 1.7% this year and 1.6% in 2020.

“The global decline will also hurt Denmark,” Wammen said. “It’s important to be mindful of the risks.” He pointed to Brexit, a global trade war and signs of economic trouble in Germany as reasons for concern.

Speaking in an interview, Wammen said that “there are greater elements of uncertainty than is usually the case,” but “the estimate we’ve put forward today is our best bet, based on how things looks today.”

Denmark has so far weathered the worst of the trade war between the U.S. and China, as well as a weakening European economy. With its biggest exporters selling products like pharmaceuticals and renewable energy, Denmark has continued to find buyers. But Las Olsen, chief economist at Danske Bank, said that may soon change. The “most realistic scenario is that we’ll also feel the slowdown,” he said. “There are already signs that it’s happening, including in companies’ expectations.” Tore Stramer, chief economist at Nykredit, called the government’s forecast “too optimistic.”

Wammen said that any further escalation of the trade war will hurt production in Danish companies. He also said there’s “no doubt” that a disorderly Brexit will hit businesses in his country, with direct exports to the U.K. currently estimated at about 85 billion kroner ($13 billion).

Wammen is part of a Social Democratic government, which has been in power since winning elections in June. The administration of Prime Minister Mette Frederiksen has promised to spend more on welfare, even if that means raising taxes.

The government’s latest set of economic forecasts, published on Tuesday, contained the following details:

• Private consumption seen at 1.9% in 2019, 2.1% in 2020
• Business investment seen at 0.2% in 2019, 4.4% in 2020
• Export growth seen at 2.7% in 2019, 2.2% in 2020

To contact the reporter on this story: Morten Buttler in Copenhagen at mbuttler@bloomberg.net

To contact the editors responsible for this story: Christian Wienberg at cwienberg@bloomberg.net, Tasneem Hanfi Brögger, Nick Rigillo

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