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Denmark Country Risk Report Q1 2019

Denmark Country Risk Report Q1 2019

Danish economic growth will remain restrained over the next decade, with real GDP growth averaging just 1 2% annually Economic expansion will remain con-strained by structural factors such as demographics and high private sector debt

The large debt burden of the private sector presents significant systemic risks Low interest rates have allowed households to reduce their debt burdens pro-portionally to their incomes and to GDP as a whole, but over the long term, the household sector will remain vulnerable to shocks

We do not expect a group of left-leaning parties to form the next government despite its lead in opinion polls owing to a divergence on immigration policy within the grouping Instead, we believe the Social Democrats will attempt to govern as a single-party minority government, relying on support from the right wing Danish People's Party While the two parties' agreement on key issues such as immigration and fiscal policy will help to smooth policy formation in certain areas, divergence in other areas combined with the SD's alienation of its traditional allies will mean the policymaking environment will remain challenging

We have decreased our 2018 real GDP growth forecast on the back of weak H118 data, although we note that this is due to base effects (after an increase to the official 2017 growth figure) rather than a change in our opinion on the health of the Danish economy Our broad view that strong private consumption will help to offset weakening external demand remains unchanged However, the possibility of a Social Democratic minority government after the next election presents downside risks to our medium-term growth forecasts Major Forecast Changes

Danish real GDP will grow by 1 5% in 2018, a revision lower from our previous forecasts of 2 0%

Key Risks

The main long-term risk to the Danish economy remains the extremely high level of household indebtedness Ultra-low interest rates are underpinning a slow deleveraging process, and the economy's vulnerability to rate hikes remains a concern While we anticipate interest rates to remain very low for several years, and the short-run outlook for credit expansion is positive, any unexpected growth slowdown or interest rate shock would leave the economy vulnerable Denmark Country Risk Q1 2019


Executive Summary
Core Views
Major Forecast Changes
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Slow H118 Growth Does Not Alter Danish Economic Outlook But Political Risks Loom
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Outlook On External Position
TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
TABLE: TOP 5 EXPORT DESTINATIONS AND GOODS EXPORTS (2017)
TABLE: TOP 5 IMPORT SOURCES AND GOODS IMPORTS (2017)
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Structural Fiscal Position
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES, 2017
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
10-Year Forecast
The Danish Economy To 2027
Growth To Be Restrained By Demographics And Debt
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Denmark Country Risk Q1 2019THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.ContentsPolitical Outlook
Domestic Politics
Denmark To Face Uncertain Policy Environment After 2019 Elections
Long-Term Political Outlook
Denmark To Remain Politically Stable Over The Next Decade
Global Macro Outlook
Inflation And Policy Risks Rising
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS, REAL GDP GROWTH, % Y-O-Y
Index Tables
TABLE: DENMARK – MACROECONOMIC DATA & FORECASTS

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