A growth accord reached late yesterday by Danish lawmakers won’t be enough to end the nation’s economic slump, according to the chief economist at its largest bank.
Denmark’s Social Democrat-led ruling coalition entered an agreement as part of a 17 billion-krone ($2.98 billion) package of measures including tax deductible home refurbishments and tax cuts on soft drinks and beer designed to curb border trade, state-owned broadcaster DR said. The accord represents the first half of the government's growth plan, Finance Minister Bjarne Corydon told DR.
“In the short term, the growth plan will stimulate the economy, but this isn’t going to have a large effect on the labor market,” Steen Bocian, chief economist at Danske Bank (DANSKE) in Copenhagen, said in a note to clients. He estimates that once the effect of the measures peaks in 2014, only a maximum of 10,000 extra jobs will have been added.
“We’re not looking at large structural changes,” Bocian said. “The long-term labor-market effect is therefore well under 5,000 positions.”
Gross domestic product shrank 0.7 percent in the fourth quarter from the third as Denmark’s economy suffered its worst year since the height of the global financial crisis in 2009. The nation has yet to emerge from a housing crisis that’s sent property values down more than 20 percent since 2007 and wiped out more than a dozen regional banks. GDP will grow 0.5 percent to 1 percent this year, the government estimates.
“The agreement will give the economy, which has stood still the past two to three years, a little push in the right direction,” Bocian said. “But it’s not, in isolation, enough to drag the Danish economy out of its slump.”
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