Perspectives

An altogether enviable situation

nd  
Eco Perspectives // 2 Quarter 2021  
economic-research.bnpparibas.com  
2
6
DENMARK  
AN ALTOGETHER ENVIABLE SITUATION  
With relatively few deaths and only a mild decline in GDP in 2020, Denmark has been fairly resilient in the face of the  
Covid-19 pandemic. To counter a second wave of the virus, more restrictive health measures had to be introduced  
in early 2021, which will push back the timing of the recovery, albeit without jeopardising it. With its vaccination  
campaign unfolding smoothly and the extension of fiscal support measures, the country is well positioned to exit  
the crisis. To better control the krone’s peg to the euro, Denmark’s central bank has made major adjustments to its  
monetary policy.  
In 2020, Denmark’s GDP contracted 3.3%. This decline is smaller than  
the European Commission’s previous estimate and a far cry from the  
GROWTH AND INFLATION (%)  
eurozone average (nearly -7% of GDP). The country’s resilience is  
undoubtedly due to the weight of automatic stabilisers, Denmark’s  
GDP Growth  
Inflation  
economic specialisation (in agricultural and pharmaceutical products,  
among others) and the successful management of the health crisis.  
Forecast  
3.5  
Forecast  
4
3
3
2
2
.0  
.5  
.0  
.5  
.0  
2.8  
After a difficult period in late winter, when the pandemic surged and  
strict lockdown measures had to be introduced, the horizon is looking  
brighter. The second wave has waned and Denmark has had virtually no  
new cases of the virus. In early April, the country reported a total death  
toll of 2,420, which as a percentage of the population, is less severe  
2.4  
1.3  
1.1  
1.5  
.0  
0.5  
.0  
0.5  
-1.0  
1.5  
-2.0  
0.7  
1
0.3  
0
-
1
than in most other countries . Thanks to the rollout of a vaccination  
-
campaign (20% of the population has already been vaccinated) and  
the gradual reopening of businesses, the economy should be able to  
start up again. The European Commission is forecasting a GDP growth  
of 3.5% in 2021.  
-2.5  
-3.0  
-3.5  
-4.0  
-3.3  
-4.5  
2019  
2020  
2021  
2022  
2019  
2020  
2021  
2022  
Like elsewhere, exports have been hard hit by the pandemic, notably in  
services (tourism), which plummeted 17.5% in 2020, while merchandise  
exports were more resilient (down only 2.6% in 2020). This 2-speed  
momentum is likely to persist throughout most or all of 2021. Although  
the tourism sector will remain sluggish until travel restrictions are  
lifted, merchandise exports should rebound as international trade  
recovers. In manufacturing, the business climate is already showing  
signs of improvement. In March, for the first time since summer 2018,  
the majority of business leaders have reported brighter prospects.  
Production volumes have picked up strongly (see chart).  
CHART 1  
SOURCE : COMMISSION EUROPÉENNE, BNP PARIBAS  
THE ECONOMY IMPROVES  
Manufacturing Output (vol. y/y, LHS)  
Business climate (balance, RHS)  
15%  
15  
10  
5
10%  
MONETARY POLICY ADJUSTMENTS  
5%  
Unlike most of the other central banks, Denmark’s central bank did  
not resort to quantitative easing. Excess reserves did not soar, and the  
key reserve rate did not influence money market conditions as much  
as elsewhere. As a result, the positive Cibor-Euribor spread widened,  
putting upside pressure on the currency. To better control the krone’s  
peg (DKK 746.038 for EUR 100), the central bank decided to narrow its  
interest rate corridor, by lowering its key refinancing rate (from 0.05%  
to -0.35%) and raising the deposit rate (from -0.60% to -0.50%), which  
is now identical to the ECB’s rate. This effectively makes monetary  
policy more accommodating.  
0%  
5%  
10%  
-15%  
0
-
-5  
-
-10  
-15  
-20  
-25  
-
-
20%  
25%  
2018  
2019  
2020  
2021  
CHART 2  
SOURCE: STATISTICS DENMARK  
Completed on 2 April 2021  
Jean-Luc Proutat and Kenza Charef (apprentice)  
1
In early April 2021, the mortality rate was 41.7 per 100,000 inhabitants, which is nearly 5 times lower than in Belgium and the UK, and 3 times lower than for neighbouring Sweden, which unsuccessfully  
experimented with herd immunisation.  
The bank  
for a changing  
world  
QUI SOMMES-NOUS ? Trois équipes d'économistes (économies OCDE, économies émergentes et risque pays, économie bancaire) forment la Direction des Etudes Economiques de BNP Paribas.
Ce site présente leurs analyses.
Le site contient 2732 articles et 723 vidéos