Economic forecast - Exports only show weak progress
Growth in the Danish economy has increased to a moderate level and seems set to continue at this level. With moderate growth, however, it will take long before the lost ground has been regained, according to DI’s economic prognosis.
The international recovery is relatively strong, but Europe, in general, and Denmark in particular, will only enjoy a small share of this recovery due to significant problems with public debt in Europe and weak Danish competitiveness.
Growth in demand has increased
During the past year, growth has increased to a moderate level. The growth in private consumption and exports has increased. This, along with greater optimism in industry, is expected to lead to a halt in the decrease in investment and stocks. Stocks are down to a level lower than ever and this has contributed significantly to the decrease in the economy in 2009, but on the other hand also contributes to increasing growth again.
Major decline in inventories
If inventories are exempted, there is no real 2010 annual growth in sight since the increase in overall demand during 2010 is not expected to be much larger than the decrease in 2009. However, it is not likely that the level prior to the crisis in the middle of 2008 can be reached in the prognosis period. We will not reach this level until 2012 or 2013.
Need for slowdown of public consumption
According to the national accounts, public consumption expenditure rose far more than planned in 2009. There are, however, signs that this increase has slowed down in 2010, and this is entirely necessary if the local councils are to keep to their agreements with the government for a 1 percent increase in consumption in 2010.
Even if it remains unchanged at the level of the fourth quarter of 2009, public consumption expenditure will rise by 1 per cent in 2010. In order to comply with the agreements with the government, a genuinely unchanged level of 2010 public consumption is required, and higher expenditure in one area accordingly requires corresponding savings in other areas.
The prognosis assumes that local councils comply with the agreements for 2010 and that total public consumption remains unchanged in 2011. At the same time, the public investment level is extraordinarily high in 2010 and must be expected to drop back towards a more normal level during 2011 and the following years. If, as planned, investments were brought forward, the investments should drop to a lower level than normal, but that is not likely to happen during the prognosis period.