Denmark Country Risk Report Q4 2018
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-portional to their incomes and to GDP as a whole, but over the long term, the household sector will remain vulnerable to shocks.
Policy formation is likely to remain constrained by parliamentary fragmentation, even after the next scheduled elections in 2019.Major Forecast Changes
Danish real GDP will grow by 2.0% in both 2018 and 2019, a revision lower from our previous forecasts of 2.1% in each year.
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 as such, 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.
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