- Basic data
- Public finances and the state budget
- Banking system
- Tax system
The Danish economy is among the strongest and most efficient in the world. Denmark has high taxes, a generous social network and a flexible labor market. The quality of public services, education and other social sectors is just as high, but at the same time sufficiently high competitiveness. Despite its high economic potential, Denmark’s economic growth has slowed over time due to the economic impact of the corona crisis in the last two years, but the economy is returning to normal relatively quickly after reopening after the corona crisis. The main positive factors influencing the growth trend in the long term include a high surplus of savings in the private sector, very low interest rates and low inflation, growth in real disposable income, a high and stable level of consumer confidence and improved conditions on the labor market. GDP per capita in Denmark is high compared to other developed countries of the world and significantly exceeds the EU average. Denmark meets all the required criteria set out in the EU’s Stability and Growth Pact, incl. compliance with the 3% GDP limit for the budget deficit. In recent years, the substantial increase in the export of goods and especially services, accompanied by progressive income from investments, is reflected in the creation of a stable current account surplus. The inflation rate in Denmark has been in a healthy range for a long time. The unemployment rate in Denmark is one of the lowest among EU and OECD countries. In recent years, the substantial increase in the export of goods and especially services, accompanied by progressive income from investments, is reflected in the creation of a stable current account surplus. The inflation rate in Denmark has been in a healthy range for a long time. The unemployment rate in Denmark is one of the lowest among EU and OECD countries. In recent years, the substantial increase in the export of goods and especially services, accompanied by progressive income from investments, is reflected in the creation of a stable current account surplus. The inflation rate in Denmark has been in a healthy range for a long time. The unemployment rate in Denmark is one of the lowest among EU and OECD countries. Check ebizdir for economical facts of Denmark.
The Danish economy is small, open and market-linked with other countries, especially within the EU (Germany, Sweden) and Europe (Norway, Great Britain). On a global scale, the most important trading partners include the USA and Japan. The solid and traditional basis of the economy is a strong agricultural sector (the production of Danish agriculture exceeds domestic demand three times), which is also one of the main sources of foreign exchange and an important domestic employer. The processing industry also has a strong position, namely in relation to food production (dairy products, pork, beer, sugar), in the area of the production of pharmacological products (Insulin), in the chemical industry the production of fuels and plastics dominates, and in the area of mechanical engineering the production of pumps, agricultural machinery, cooling equipment or telecommunications device. In the consumer industry, clothing, furniture and toys (LEGO) play a leading role. The position of the energy sector (oil and gas extraction, energy production from renewable sources) is also significant. The financial sector (Danske Bank, Nordea) and, last but not least, the transport sector also contribute to the growth of Danish GDP. maritime (Maersk).
|GDP growth (%)||2.4||-4||2.9||2.7||2.8|
|Export of goods (billion USD)||110||104.4||144.6||156.2||162.4|
|Import of goods (billion USD)||97.2||90.5||130.4||139.5||154|
|Trade Balance (Billion USD)||18.2||18.7||24.9||28.3||20.2|
|Industrial production (% change)||3||-5.2||5.7||3||2.3|
|OECD export risk||ON||ON||ON||ON||ON|
Source: EIU, OECD, IMD
Public finance and state budget
|State budget balance (% of GDP)||-0.1|
|Public debt (% of GDP)||39.5|
|Current account balance (billion USD)||30.8|
Like the economies of other European Union countries, the Danish economy was significantly affected by the economic crisis, stemming from restrictive measures in the economy and society as part of the fight against the coronavirus pandemic. However, the already available data for 2021 clearly shows that the Danish economy has successfully recovered from the impact of the crisis, achieving growth of 3.5% at the end of the year. The full relaxation of all coronavirus measures had a positive effect on the recovery in the area of services and household consumption.
The fiscal shock associated with the global corona crisis had a smaller impact on the Danish economy than it did in most other EU countries. The level of public debt should not exceed 40% of gross domestic product at the end of 2022. The state budget balance could be -1.5% of GDP and the current account balance should remain in the black and reach USD 27.5 billion. The corona crisis did not have a significant impact on the balance of payments (DKK 1billion in April 2021) and did not affect the amount of foreign exchange reserves (DKK 441 billion in April 2021) or the increase in Denmark’s foreign debt (less than DKK 40 billion at the end of 2021 ).
The financial sector in Denmark employs around 4% of the total workforce. The balance sheet of the financial sector is about 4 times larger than the Danish GDP. The largest part (approx. 37% of the total balance) are commercial banks. Mortgage banks are also an important sector, representing approximately 31% of the total balance sheet.
The National Bank of Denmark determines monetary policy (target exchange rate policy; Denmark is a member of the ERM II regime, with a narrower fluctuation band of ± 2.25%) including the structure of interest rates and monitors the money supply. According to the latest published data, there are a total of 110 financial institutions of the commercial or savings type operating in Denmark, of which 81 are domestic and 29 are branches of foreign houses (last available data for 2016), which manage over 2,000 bank branches.
According to the size of working capital, financial institutions in Denmark are divided into 6 groups, the first group with capital over DKK 65 billion includes:
- Nordea Bank Danmark A/S, part of the largest financial group in the Nordic countries (headquarters of the group is located in Helsinki),
- Danske Bank A/S, a Danish multinational banking and financial corporation, the largest banking house in Denmark and at the same time an important retail bank in the Northern European region,
- Jyske Bank A/S, the third largest Danish bank by market share and the largest bank in Denmark based outside of Copenhagen (in Jutland)
- Sydbank A/S, one of Denmark’s largest full-service banks, was formed from the merger of four smaller banks,
- Nykredit Bank A/S, one of Denmark’s leading financial services companies with activities ranging from mortgage, retail and investment banking to insurance, leasing and fixed income trading and asset management.
Standard and Poor’s and Moody’s rate Denmark and the main Danish financial institutions from A+ to AAA. From an international point of view, the Danish securities market has a prominent position, being ranked as the seventh largest in the world and fourth in Europe. All securities are traded on the Copenhagen Stock Exchange, which was the first in the world to introduce electronic securities trading.
The tax system is one of the most complex in the world. The basic types of taxes are personal income tax, corporate income tax, environmental taxes (CO 2 ) and capital gains tax. The main indirect taxes are VAT, car registration tax (up to 150% of the car’s value), customs duties, excise taxes, stamp duty, inheritance tax, gift tax, personal property tax (not paid by companies), real estate tax and tax on “controlled” foreign companies. The tax burden in Denmark grew continuously from 1930 (12% of GDP) until 1988, when it reached a maximum level of 50.4% of GDP. In recent years, it has stabilized at the level of approx. 48-49% of GDP (all measured in market prices), which, next to Sweden, is the highest in the world.
Individuals pay state income tax (8.30%), municipal income tax (varies by municipality approx. 22-28%), church tax (0.71%, voluntary), health insurance contribution (2.0% ), contribution to the labor market (8.0%), etc. The maximum tax ceiling for natural persons is 51.95%. Corporate income tax (profit) is 22.0%.
VAT is uniform at 25%, i.e. that the reduced rate does not exist. The payment of VAT does not apply to the sale and rental of real estate, the supply of gas, water, electricity and heating; lottery winnings; the sale of shares and bonds, other financial transactions (post offices) and insurance transactions; health care, social services, school fees; amateur sports, certain cultural events and art supplies; transport of people by means other than tourist buses. Newspapers and exports also have zero VAT. In principle, VAT is refunded on all purchased goods and services intended for business. The refund also applies to foreign entrepreneurs who do not have their place of business in Denmark (the so-called thirteenth directive). VAT cannot be refunded on cars, hotel accommodation, conference and entertainment venues.