IMF on Denmark: Impressive post-pandemic recovery

Danish flag.
Danish flag. Photo: Højberg

Denmark has achieved an impressive post-pandemic recovery. Output and employment level are now well above its pre-pandemic trajectory, contributing to inflationary pressures, according to the concluding statement of the IMF´s mission to Denmark.

IMF missions are undertaken as part of regular consultations under Article IV of the IMF’s Articles of Agreement.

Furthermore the IMF mission says in its statement that more recently, there are signs that economic activity has started slowing, and high inflation, tightening financial conditions, and weaker external demand will weigh on the outlook. The financial system has remained stable, although house prices have fallen. The medium-term growth outlook remains modest, reflecting well-known demographic headwinds in Denmark and lower global growth.

Policy priorities

Against this background, the policy priorities are as follows.

  • Consider additional fiscal tightening to lower price pressures and provide insurance against upside inflation risks.
  • Safeguard financial stability by closely monitoring risks around borrowers’ creditworthiness, commercial real estate, cross-border exposures, and liquidity while further tightening macroprudential policies targeting existing pockets of vulnerability.
  • Pursue structural reforms to support high, inclusive, and sustainable growth, including in the areas of digitalization, competition, labor markets, education, and green transition.

See the full statement here.