Danish Central Bank Cuts Growth Forecast as Europe Hurts Economy

Denmark’s central bank reduced its economic growth forecast for this year as Scandinavia’s weakest nation struggles to increase exports and private consumption amid a European recession.

Gross domestic product will grow 0.5 percent in 2013, the Copenhagen-based bank said today, lowering its 0.8 percent March forecast. The economy will expand 1.7 percent in 2014 and 2015, matching prior estimates, the bank said.

“The economic situation doesn’t warrant easing of fiscal policy, even though the normalization of private-sector demand has been protracted,” Governor Lars Rohde said in a statement. “Instead, focus should be on increasing private and public sector productivity.”

The economy is struggling to emerge from a burst property bubble, which triggered a banking crisis and wiped out more than a dozen lenders since 2008. The $300 billion economy, home to diabetes-drug maker Novo Nordisk A/S, is also suffering from slowing export demand from the 17-nation euro area economy, which is set to contract for a second consecutive year, according to the average estimate of 47 economists surveyed by Bloomberg.

Denmark’s economy returned to growth in the first quarter buoyed by a gain in consumer spending and rising inventories. GDP rose 0.2 percent after contracting a revised 0.9 percent in the last three months of 2012, Statistics Denmark said May 31. The economy shrank 0.5 percent last year.

The government on May 27 cut its growth forecast for this year to 0.5 percent from the 0.7 percent predicted in April. It kept its 1.6 percent growth projection for 2014.

Denmark has a fixed exchange-rate policy and pegs its krone to the euro. The central bank targets a krone rate of 7.46038 against the single currency. The bank in May cut its key lending rate to 0.2 percent from 0.3 percent and kept its deposit rate at minus 0.1 percent.

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