HIGHLIGHTS • Growth expectations revised down for 2025 • Tax cuts could lead to a small decline in inflation • Large regional differences in the housing market • Stability around the fixed exchange rate policy DENMARK Clipped wings The previously high-flying Danish economy has had its wings clipped as historical growth figures have been revised lower and industrial production has declined, particularly in the pharmaceutical sector. Despite reduced altitude, the Danish economy is still very strong: Unemployment is low, the current account surplus has reached record levels and the public sector has minimal debt. This back- drop provides considerable flexibility during a time when substantial resources need to be allocated towards rebuilding defence capabilities. Growth expectations revised down for 2025 As described in the theme article, Statistics Denmark has made large revisions of historical national ac- counts figures over the summer. Coupled with the surprisingly weak GDP figures for Q1, this has led us to revise down our 2025 growth expectations quite sharply. In the new forecast we expect GDP growth of 1.8% this year, compared to 3.2% in our May fore- cast. However, due to the more subdued growth expecta- tions, the basis for comparison for 2026 will be more favourable. So even though we leave our growth pro- file from May basically unchanged, our revised calculations now show a higher growth estimate for 2026 – from our previous forecast of 2.0% to 2.3%. We also include 2027 in the forecast horizon for the first time. Here we estimate a 1.9% increase. We believe the risks to our new forecast to be bal- anced – however, it is worth noting that the signifi- cant quarterly variations in Denmark's national ac- counts data always introduce some natural uncer- tainty into any economic predictions. The pharmaceutical industry has driven growth Measured since early 2021, overall economic activity has increased by about 11%. The pharmaceutical sec- tor has accounted for more than half of this economic growth and now represents one-quarter of all Danish industrial turnover. Since 2021, turnover in the phar- maceutical industry has more than doubled. The substantial growth in the pharmaceutical indus- try has helped to significantly boost exports to the US, while also contributing to increasing the current account surplus to an all-time high. A large and growing part of production in the phar- maceutical industry takes place outside Denmark. As +2.3% Expected GDP growth in 2026 7 The number of consec- utive quarters with pos- itive growth in house- hold consumption -0.40% point Spread between de- posit rates – Danish central bank and ECB Source: Nordea estimates and Macro- bond a result, almost all of recent years’ growth in goods exports has come from production facilities located outside Denmark, particularly in the US. The industry is thus also relatively well protected against the ef- fects of the trade war since a large part of the pro- duction takes place locally. However, production in the pharmaceutical industry has slowed in recent quarters, causing goods exports to contract relatively sharply in Q1 2025. Although growth picked up again in Q2, it means exports will grow significantly less in 2025 as a whole compared to previous years. In the coming years we expect ex- ports to grow further owing to an improved growth outlook in key export markets in the Euro area and the other Nordic countries. Modest household consumption growth Household consumption has increased for the last seven consecutive quarters. But the level is still be- low the historical peak during the COVID-19 pan- demic in 2021. 4 / DENMARK: MACROECONOMIC INDICATORS, Baseline scenario 2024 2025E 2026E Real GDP, % y/y 3.5 1.8 2.3 Consumer prices, % y/y 1.4 1.9 1.7 Unemployment rate, % 2.9 2.9 2.9 Current account balance, % of GDP 12.2 11.8 11.3 General gov. budget balance, % of GDP 4.5 2.4 1.3 General gov. gross debt, % of GDP 29.1 29.6 28.9 Monetary policy rate, deposit (end of period) 2.60 1.60 1.60 USD/DKK (end of period) 7.17 6.22 6.01 2027E 1.9 2.1 3.0 10.5 1.6 28.2 2.10 5.92 16 / Nordea Economic Outlook / 3 / 2025
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