Denmark’s Central Bank Governor Nils Bernstein said the economy will contract this year and lowered his forecast for economic expansion in 2013 as households and businesses in the Nordic country cut spending.
The change in gross domestic product will be “negative” this year and the rate will grow 1 percent to 1.5 percent in 2013, Bernstein said today in a speech in Copenhagen. That compares with the central bank’s Sept. 20 estimate of 0.3 percent growth in 2012 and 1.6 percent expansion next year.
The Danish economy is suffering from a burst real estate bubble, which has pushed more than a dozen regional lenders into insolvency since 2008. Denmark’s economy barely grew last quarter, while a contraction in the three months through June was deeper than previously estimated, the statistics office in Copenhagen said last week.
“With the latest domestic GDP data the outlook is for negative growth this year,” Bernstein said at the Danish Bankers Association’s annual meeting. “The private sector is consolidating in the wake of the financial crisis. This is understandable, but it also holds down consumption and investments.”
Denmark’s third-quarter GDP grew 0.1 percent from the second quarter, the statistics office said Nov. 30. The contraction in the second quarter was 0.7 percent, versus an earlier reported 0.4 percent.
Bernstein said today Denmark’s competitiveness has dropped by about 20 percent in the past decade as the country’s relative wage costs have grown.
“We have lost and we are still losing production jobs in the industries exposed to this competitiveness,” he said. “If we want to improve employment there’s no way around improving competitiveness.”
Denmark’s gross unemployment rate was 6.3 percent in October, the statistics office said Nov. 29. That compares with 2.5 percent in July 2008.
Danske Bank A/S, the country’s largest lender, on Nov. 30 cut its 2012 forecast for the Danish economy to a 0.5 percent contraction, compared with a previous estimate for 0.1 percent growth. The economy will grow 0.7 percent in 2013, less than the 1.2 percent the bank predicted earlier.