Denmark Ends Annus Horribilis as Economy Posts 0.6% SlumpPeter Levring
Denmark suffered its worst economic contraction last year since the peak of the global financial crisis in 2009 as it struggles to shake off a burst housing bubble that’s killing consumer spending and construction.
Gross domestic product shrank 0.6 percent last year, the biggest annual decline in three years, the Copenhagen-based statistics office said. The economy plunged 0.9 percent in the fourth quarter, three times more than estimated in a Bloomberg survey of economist.
“In terms of the economy, 2012 was an annus horribilis,” Jacob Graven, chief economist at Sydbank A/S, said in a note. “It was a miserable year.”
Denmark’s economy, home to A.P. Moeller-Maersk A/S, the world’s largest shipper, contracted more than estimated as consumer spending dropped and as Europe’s debt crisis sapped exports. The country is fighting to emerge from a burst property bubble in 2008 that triggered a local banking crisis and wiped out more than a dozen lenders.
Five years into the financial crisis the Social Democrat-led government this week turned to corporate tax cuts and lowering business costs to boost the economy while reducing spending on the elderly, unemployed and students. Prime Minister Helle Thorning-Schmidt said she’ll cut business costs and align Denmark’s corporate tax rate with Germany and Sweden to revive competitiveness after unemployment more than tripled since 2008 and Denmark lost a third of its industrial jobs.
The coalition on Feb. 26 pledged to lift annual growth to 2 percent on average from 2014 through 2020, and unveiled plans to create 150,000 private jobs by 2020 through increased public spending and corporate tax cuts.
“Once again the Danish economy is halfway into a recession,” said Helge Pedersen, chief economist at Nordea Bank AB in Copenhagen. “On that backdrop there’s reason to commend the government for the timing of its growth plan.”
Exports slid 1.6 percent in the quarter while consumer spending declined 0.1 percent, the statistics office said. Total investments rose 0.3 percent, even as housing construction fell 1.5 percent. Public spending rose 0.3 percent in the quarter.
“The Danish economy is taking a beating on two fronts,” said Niels Roenholdt, a senior economist at Jyske Bank A/S. “Foreign demand suffered from Europe’s crisis while private consumption declined due to domestic households increasing savings. The light in the dark is employment, which improved slightly.”
Denmark’s gross unemployment rate was 6.0 percent in January, down from 6.1 percent in December, the statistics agency said in a separate statement.