Economic studies
Denmark

Denmark

Population 5.8 million
GDP 68,202 US$
A2
Country risk assessment
A1
Business Climate
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Synthesis

major macro economic indicators

  2020 2021 2022 (e) 2023 (f)
GDP growth (%) -2.0 4.9 3.6 0.1
Inflation (yearly average, %) 0.4 1.9 7.7 4.8
Budget balance (% GDP) 0.2 3.6 1.7 0.4
Current account balance (% GDP) 7.9 9.0 13.0 10.4
Public debt (% GDP) 42.2 36.6 32.1 30.7

(e): Estimate (f): Forecast

STRENGTHS

  • World’s second-largest shipping operator (2022)
  • Almost energy self-sufficient (oil and gas in the North Sea and Greenland, as well as numerous wind-energy parks)
  • Niche industries with cyclically non-sensitive export goods (e.g. pharmaceutics, wind turbines and food products)
  • Well managed public finances and large current account surplus
  • Krone pegged to the euro
  • NATO member

WEAKNESSES

  • Small, open economy sensitive to external demand, especially from Germany and Sweden
  • Highly-fragmented Parliament, making coalition-building difficult (threshold for a party to enter Parliament is only 2%; 4 extra seats attributed to the Faroes Islands and Greenland)
  • Very high household debt (255% of net disposable income in 2021)
  • Public sector constitutes a significant part of the country’s employment (30% of employees in the first nine months of 2022)
  • High private external debt (151% of GDP in 2021)
  • Growing independence movement in Greenland 

Risk assessment

Dark clouds loom over the Danish economy in 2023

Despite resilient economic growth in 2022, driven by exports and private investment, the Danish economy is set for a moderate slowdown in 2023, due to durably high energy prices and inflation, combined with a decrease in private savings. The Russian invasion of Ukraine only had a limited direct impact on the Danish economy as Russia accounted for less than 1% of Denmark’s goods trade exports and a mere 2% of its imports. The Russian gas export cuts to Denmark also had only a minor direct effect as natural gas accounted for just 6% of the energy mix in 2021 (and can be replaced by other sources), compared with 48% for wind, 21% for bioenergy and 16% for coal. While the direct impact is limited, the indirect impact, caused by globally higher energy prices in the European market, is spreading to food and other goods prices owing to increased production and transportation costs. This pushed the yearly inflation rate in Denmark up to an average of around 7.7% in 2022, its highest level since 1982, when the second oil price shock hit Denmark. Consumer prices are expected to increase further throughout 2023, but at a slower pace than in 2022. Price pressures are eroding the purchasing power of private households. Furthermore, consumption growth should further weaken over the winter and spring months amid decreasing savings. Higher wage demands in 2023 are likely as the labour market remains strong with an unemployment rate that reached a 14-year low and job vacancies close to double their pre-pandemic level. To stabilise inflation expectations and because the Danish Krone is pegged to the euro, Denmark’s central bank increased its key interest rate by 320 basis points in 2022 and first quarter of 2023 to 2.60% and is expected to follow the ECB for the remainder of the year. Rising interest rates will put an additional brake on private expenditure, notably housing investment, as the (mostly variable) mortgages rates already rose noticeably in the second semester of 2022. In general, private investment is expected to be limited in 2023 due to high inflation, as well as growing financial uncertainty. Support will come from state aid for households and companies to cope with higher energy prices. In addition, investments are planned under the EU Recovery Fund from which Denmark will receive €923 million for the 2021-2027 period for investments in the green and digital transitions. That said, the outlook for Denmark is better than for many other European countries as it specialises in niche markets, including food products (pork and cheese), pharmaceuticals and renewable energy technology, which are less sensitive to cyclical fluctuations.

 

Twin surpluses shrink slightly

In 2023, the public surplus is expected to decline as expenditure incurred as a result of the war in Ukraine (the influx of refugees and defence spending) and energy will weigh on the budget, meaning that the low public debt should only decrease by a narrow margin. The current account surplus reached a record high in 2022 on back of a massive increase in the trade in services surplus, which is probably due to high profit generated by maritime transportation. The current account surplus should shrink somewhat but still remain high on back of expected weaker demand for Danish goods and maritime services from Western European trade partners, combined with a minor normalisation in import prices.

The victorious centre-left bloc formed a new left-right coalition

In November 2022, general elections took place in Denmark after Prime Minister Mette Frederiksen called a snap election in early October in the wake of a scandal over the illegal decision to slaughter the country's entire mink population over fears of a new Covid-variant in 2020. Frederiksen’s Social Democratic Party won the election and gained 50 out of the 179 seats in Parliament, its best election result in 20 years, while the main opposition party Venstre (liberal-conservative) almost halved its seats to a current 23 seats. In a political landscape composed of 16 parties, parties are usually divided between a centre-left “red” and a centre-right “blue” bloc. Late in 2022, after dropping negotiations with traditional left-wing allies, Frederiksen’s Social Democrats formed a coalition with Liberals and Moderates (who won in their first election with 16 seats and became the second-largest party in Parliament) securing 89 seats out of 179 seats. The new government broke with the traditional Danish left-right divide for the first time in more than four decades and is the first majority coalition government in Denmark since 1993. Inflation, climate change, healthcare, and immigration are the most critical issues for the Danes. The coalition has revealed its plan to make Denmark climate-neutral by 2045 and reduce carbon dioxide emissions on a national basis. Against the backdrop of war in Ukraine, the Danes voted on 1 June 2022 to join the European Union's defence and security common policy, ending their 30-year opt-out. The move means that Denmark will be able to take part in joint EU military operations and cooperate regarding the development and acquisition of military capabilities within the EU. The government is expected to remain in office until the next scheduled election in November 2026. Another snap election is possible, but very unlikely, given the Danish political system’s traditional stability as well as low support of the coalition parties in polls since the election. 

 

Last updated: April 2023

Payment

Denmark is in the process of becoming a cashless society. Bank transfers are the most commonly used means of payment. All major Danish banks use the SWIFT network, as it is a rapid and efficient solution for the payment of domestic and international transactions. Denmark has also implemented the Single Euro Payments Area (SEPA) in order to simplify bank transfers in euros.
Cheques and bills of exchange are now seldom used in Denmark. Both are seen as an acknowledgement of debt.
Unpaid bills of exchange and cheques that have been accepted are legally enforceable instruments that mean that creditors do not need to obtain a court judgement. In cases such as these, a judge-bailiff (Fogedret) is appointed to oversee the enforcement of the attachment. Prior to this, the debtor is summonsed to declare his financial situation, in order to establish his ability to repay the debt. It is a criminal offence to make a false statement of insolvency.

Debt collection

Amicable phase

The amicable phase begins with the creditor, or his legal counsel (e.g. attorney, licenced collection agency, etc.), sending the debtor a final demand for payment by post, in which he is given 10 days to settle the principal amount, plus any penalties for interest provided for in the initial agreement.
Once the 10 days from the date of the letter of demand have expired, the creditor’s legal counsel can charge the debtor for out of court collection costs (based on an official tariff) and present the debtor with a debt collection letter which gives them 10 further days to pay. If this payment deadline is not respected, the debtor can be sent a warning notice which sets out the date and time of a visit. A third reminder can be sent and calls can be made.
When no specific interest rate clauses have been agreed by the parties (maximum of 2% per month), the rate of interest applicable to commercial agreements contracted after 1 August 2002 is either the Danish National Bank’s benchmark, or the lending rate (udlånsrente) in force on 1 January or 1 July of the year in question, plus an additional 8%.

 

Legal proceedings
Fast-track proceedings

Since January 1, 2008, overdue payments which do not exceed DKK 50,000 or EUR 6,723 and are uncontested are handled via a simplified collection procedure (forenklet inkassoprocedure), whereby the creditor submits an injunction form directly to the judge-bailiff for service on the debtor. If there is no response within 14 days, an enforcement order is issued.

 

Ordinary proceedings

If a debtor fails to respond to a demand for payment, or if the dispute is not severe, creditors can obtain a judgement following an adversarial hearing or a judgement by default ordering the debtor to pay. This usually takes three months.
In the case of a judgement by default, the debtor can be ordered to pay the principal amount plus interest and expenses (including court fees and, where applicable, a contribution to the creditor’s legal costs) within 14 days.
All cases, whatever the size of the claim and level of complexity, disputed or not, are heard by the court of first instance (Byret). The court is presided over by a panel of three judges, or one judge assisted by experts, who consider both written and orally-presented evidence.
Appeals on claims which exceed DKK 10,000 are heard by one of two regional courts − either the Vestre Landsret in Viborg (for the Jutland area) or the Østre Landsret in Copenhagen (for the rest of the country). Exceptional cases that involve questions of principle can be submitted directly to the appropriate regional court.
These proceedings involve a series of preliminary hearings, during which the parties present written submissions and evidence, and a plenary hearing, in which 

the court hears witness testimonies and arguments from both parties. Court costs depend on the value of the claim. The losing party generally bears the legal costs.
Denmark only has commercial courts in the Copenhagen area. These comprise a maritime and a commercial court (Sø-og Handelsretten), which are presided over by a panel of professional and non-professional judges. These judges are competent to hear cases involving commercial and maritime disputes, competition law, insolvency proceedings and cases involving international trade.

Enforcement of a legal decision

Domestic judgements become enforceable when all appeal venues have been exhausted. If the debtor fails to comply with the judgment within two weeks, the creditor can have it enforced through the bailiff’s Court. Enforcement can take the form of a payment arrangement, or a seizure of the debtor’s assets. Payment plans are normally agreed in court and the debtor’s assets that can be seized are normally agreed at the same time. Courts normally accept payment plans of up to ten to twelve months depending on the amount.
As concerns foreign awards, the scenario can be more difficult if the decision is issued by an EU member, as Denmark does not adhere to the EU regulations on European Payment Order procedures. Decisions issued by non-EU members can be recognised and enforced, provided that the issuing country is part of a bilateral or multilateral agreement with Denmark.

Insolvency proceedings

Out-of-court proceedings

Non-judicial restructuring can take place through formal composition agreements, whereby the debts owed to the creditors are acknowledged and payment instalment agreed upon, without having recourse to a judge. Nevertheless, the efficiency of the Danish court system means that out-of-court proceedings tend to be used as informal negotiation tools. 

 

Restructuring proceedings

Restructuring procedures are based on decisions handed down by the bankruptcy court. The court examines the possibility of a compulsory composition and/or a business transfer. These proceedings can be initiated by the debtor, in cases of insolvency, or by the creditor (but only with respect to legal entities). The court then appoints a restructuring administrator. The debtor maintains control of his assets during the procedure but is not allowed to enter into transactions of material significance without the consent of the restructuring administrator. The outcome of the procedure depends on the administrator’s proposal. 

 

Liquidation

Liquidation procedures are based on bankruptcy orders issued by the Court, either at the request of the debtor or a creditor. The debtor must be insolvent. The Court appoints a trustee who is authorised to act in all matters on behalf of the bankrupt estate. His primary objectives are to liquidate the debtor’s assets and distribute the proceeds between the creditors. Creditors need to file their claims with the trustee for assessment.

Insolvency trend Denmark
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