Danish economy is a modern market economy, with a high-tech agricultural sector, an advanced industry that incorporates many leading firms in pharmaceuticals, renewable energy and maritime shipping. However, apart from goods, services play a major role in the economic developments of the country – services’ contribution accounted to 75.7% of the total GDP of the country, in 2015. It is indicative that the Confederation of Danish Enterprise network comprises of 17,000 Danish companies and 100 trade associations within trade, tourism, business services, IT and welfare services and transportation (See chart below).
The average growth rate of the country’s GDP during the 2003-2007 period, was 2.4%, while in 2008 and 2009, it averaged at about -2.9%. In 2009, the global economic decline, provoked a dramatic downturn for Denmark, reflected in the -5.1% GDP growth for that year (See chart below). Following the financial crisis, up to 2014, total demand and total supply were powered by increased foreign trade, contributing to an average GDP growth of 0.76% over the period. Despite this development, Denmark has not yet managed to reach the pre-crisis levels of growth, as has Germany, the US and Sweden. It is indicative that in 2015, GDP growth at 1.2%, lagged behind the average 1.9% of the EU.
Considering the aforementioned and despite the high level of prosperity that Danes enjoy presently, Denmark has been suffering historically from weak productivity growth. Indicative is the fact that since 2004, Denmark has had one of the lowest productivity growth rates among the OECD members.
Consequently, this is a key challenge that Danish governors will need to address, in order to maintain a steady rise in living standards and the prosperity of the citizens. Towards the increase of productivity, as a fundamental factor of growth and prosperity, focus should be placed on technological progress, the generation of new ‘knowledge’, larger capital stocks and the fostering of innovation and of the respective companies creating any such.
Denmark’s foreign trade can be separated in two periods, after World War II. The first, during the 1966-1986 period, was characterised by successive deficits, and the second, from 1987 till 2015, by successive surpluses.
At the start of the global financial crisis, in 2009, despite the sharp drop of both imports and exports, positive trade balance was maintained (See chart below).
In terms of contribution to the GDP, the external trade’s significant rise, lead imports and exports to peek in 2008, at 50% and 54% of the Danish GDP, respectively. After a considerable decline in 2009, foreign trade showed signs of recovery until 2014 (in that year, volumes of imports increased by 5%, while those of exports by 3%). However, in 2015, both imports and exports of goods and services decreased, by 1.4% and 1% respectively, breaking the rising pattern since 2009, and contributing to a total to 53.4% of GDP (See chart below).
Denmark’s largest trading partners, are mostly those geographically closest to the country. In 2015, the main export markets were Germany, Sweden, the US, the UK, and Norway (See chart below), while 6.8% of total exports were directed to BRIC countries (Brazil, Russia, India and China).
The main commodities exported by Denmark, include a wide range of products, such as pharmaceuticals, windmill parts, food and mink furs.
As far as imports are concerned, the main commodities sourced from abroad included pharmaceuticals, oil, cars and electronics. The main exporters to Denmark in 2015, were Germany, Sweden, UK and the Netherlands (see chart below).
Further, it cannot be omitted to mention that according to the World Bank’s Doing Business Report for 2017 , Denmark is considered the best country in the world, as a basis for international trade (and 3rd overall, as far as the ‘ease of doing Business’). This is not a surprise for Denmark though; it can be partly attributed to the geostrategic position of the country (as mentioned before), but most importantly to the organisation, regulatory framework and continuous and successful efforts and measures taken by the governors, towards the enhancement of trading activity of the country. Latest initiatives, including the reduction of the minimum capital requirement for LLC companies, to the benefit of new start-ups (2010), the electronic submission of property transfer applications (2013), the reduction of the paid-in minimum capital requirement (2014), introduction (2015) of an online platform allowing simultaneous completion of business and tax registration, have all contributed towards the World Bank’s aforementioned ranking.
In terms of services, related trade has increased almost fivefold in the last 20 years (1995-2015), preserving always an associated trade surplus. Despite the significant drop in 2009 exports, the services trade has exceeded the pre-crisis levels, contributing significantly to Danish foreign trade. Today, sea transport represents almost half (49%) of Denmark’s exported services, while other business services, travel, telecommunication/IT and construction services also contribute significantly to the exported services value.
More specifically, in 2015, services exports accounted for about DKK 415.2 billion and imports amounted to DKK 342 billion, resulting in a large surplus of some DKK 73.2 billion.
Since 2012, the Danish employed workforce, has increased by 56,100 persons. The Services sector –including public administration, education and health- employs the highest number of people in Denmark, with primary industries –e.g. agriculture, forestry and fishing- accounting for only 2.7% of employed workforce.
In a different division in terms of the status of employment, a significant 75.4% is attributed full-time employee status, while the remaining 24.6% are part-time employees.
Today, Denmark has the 4th highest (following Sweden, Germany and the Netherlands) employment rate in the European Union, as 72.8% of the population aged between 15 and 64 years old, is employed. A significant contribution to the overall employment rate, is attributed to the high participation of women in the labour force of the country, as well as to the low youth unemployment percentages. In fact from 2012 onwards, unemployment has been dropping, reaching in 2015, the 4.5% mark.
In particular, only 1 out of 5 people at a working age (15-64 years old), are not part of the labour force; however, more than 60% of this amount, are either students or early retirement pensioners. In confirmation of the above, the long-term unemployment in 2015, was only 1.7%.
According to the World Bank “Doing Business” report for 2017, Denmark for the sixth consecutive year, has been considered the easiest place for doing business in the EU, and 3rd –after New Zealand and Singapore- at a global level (as also discussed in part earlier).
Denmark, through a responsible economic policy, has managed to support a stable economic development, with low interest and inflation rates –essential conditions for investments. The least detrimental to competition business regulation employed by the country, has fostered competition, through low prices for both companies and households, and resulted also in increased productivity.
More specifically, inflation in recent years, has fluctuated from an average low level of 2.1% over the period 1990-2007, with the exemptions of 2000 and 2005 when it reached 3%, to an average inflation rate of 1.3%, since 2010 onwards.
Considering Denmark’s EMU (public) debt, this was further reduced to 40.4% of GDP in 2015, much lower than the limit of 60% set by EU. Predictions for 2016, 2017 indicate that this will stabilise at the same level.
Despite the aforementioned financial stability of the country, the effective business regulatory framework and the well-developed digital infrastructure and high energy efficiency, Foreign Direct Investments in Denmark have fallen significantly (See chart below) since the year 2000 when they had peaked at some US $36 Billion. In the last decade (2005-2015) in fact, there were 3 years (2010, 2013 and 2014), in which the FDI value was negative.
The low investment activity in Denmark, can be attributed to a large extent to the high worldwide financial uncertainty, affected further by the Brexit referendum result.
On the other hand, as is common for rich and technologically advanced countries, Danish investment outflows have been higher than the respective inflows. For example, according to a different source’s data (OECD), in 2015, Danish investments abroad, amounted to some US $11.2 Billion, in contrast to the some US $5.3 Billion of inwards investments in Denmark.