Economic studies
Denmark

Denmark

Population 5,6 million
GDP per capita 52138 US$
A2
Country risk assessment
A1
Business Climate
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Synthesis

major macro economic indicators

  2014 2015  2016(f) 2017(f)
GDP growth (%) 1.3 1.0 1.0 1.7
Inflation (yearly average) (%) 0.6 0.5 0.5 1.2
Budget balance (% GDP) 1.5 -1.7 -0.9 -1.9
Current account balance (% GDP) 7.7 7.0 6.7 6.5
Public debt (% GDP) 44.8 40.4 38.8 38.2

 

(f) Forecast

STRENGTHS

  • World’s fifth largest ship operator        
  • Energy self-sufficiency (North Sea and Greenland oil and gas), net energy exporter
  • Niche industries (renewable energies/biotechnologies)
  • Large current account balance surplus

WEAKNESSES

  • Open economy sensitive to external demand
  • Declining competitiveness of manufacturing companies
  • Very high household debt levels (290% of disposable income)
  • Scale of public sector employment (30% of employees)

Risk assessment

Domestic demand boosting activity

The slow rate of growth of exports and consumption in 2016 thwarted the expected acceleration in growth. In 2017, there is likely to be a moderate upturn in activity, driven by domestic factors. Household consumption will underpin growth thanks to improvements in the labour market. Households are expected to spend more as wages and job opportunities increase, despite the very high debt levels (290% of disposable income, the highest ratio in the OECD). At the same time, increased household incomes will push up property prices as well as residential investment, in a context of very low interest rates. The danger of the property bubble bursting would increase if interest rates were to be raised.

In addition, investment will make a positive contribution to growth, sustained by increased consumption and a relaxed monetary policy on the part of the Central Bank. The sectors in question are the pharmaceutical, capital goods (transport in particular) and construction sectors. These sectors, with large workforces, will sustain economic activity thanks to an improved utilisation of production capacities, part of the reason for lower unemployment. The position of the energy (oil and gas) sector in the economy will however gradually decline and will remain subject to low raw material prices.

Inflation is expected to increase in 2017 as a result of the slow rise in oil prices alongside higher wages. The Danish Central Bank’s relaxed monetary policy (policy interest rates: 0%; deposit rates: -0.65% since February 2015) is likely to continue in the short term bearing in mind the low level of inflation, and the pegging of the Danish krone to the euro. This policy has in particular enabled the maintenance of the competitiveness of its exports whilst helping sustain the domestic demand.

 

Large current account surplus and healthy public finances

Given the low level of unemployment, government policy is not expected to focus on boosting activity through employment. The government will thus continue its prudent budget policy aimed at avoiding potential labour shortages in certain sectors. Nevertheless, any increase in the public deficit in 2017 will be due to a falling off of tax receipts arising from the Pension Yield Tax on pension providers’ added-values, which were at a particularly high level in 2016. Public expenditure will fall slightly but still remain at a high level. The 2017 budget however includes measures aimed at improving the healthcare system and the collection of taxes, as well as boosting aid for refugees and displaced persons from conflict zones (particularly the Middle East). The deficit as well as the public debt will therefore remain well below the threshold defined by the European Stability and Growth Pact (respectively 3% and 60% of GDP).

The current account surplus will hold steady in 2017. This will be due mainly to the vitality of exports, boosted by the past depreciation of the krone pegged to the euro, which will offset the consumption driven rise in imports. Exports of agricultural products (pork, milk) will be the most dynamic, mainly towards Asian countries and Germany. Machines and transport equipment will also feature among the leading exports, alongside chemical (biotechnology) products.

Brexit however could have a negative impact on exports as a result of declining demand in the United Kingdom (3rd biggest export market) and thus reduce the country’s current account surplus.

 

Serious disagreements within the governing coalition

Lars Løkke Rasmussen was elected Prime Minister in the parliamentary elections in June 2015, with a four year term of office. The right-wing grouping (including all the right-wing parties such as Venstre, the Prime Minister’s party, and the extreme right of the Danish People’s Party (DPP)), won a majority in parliament against the left grouping including in particular the Social Democrats (SD). The liberal party (Venstre), which heads the government, holds only 34 of the 179 seats in Parliament. The significant disagreements between the various right-wing coalition parties does not leave the Prime Minister much room for manoeuvre in carrying out reforms. The far-right party (DPP) does not support the government’s strategic growth plan (2017-2025) which includes a reduction in taxes on companies and high incomes. The continuation of these disagreements could result in early elections as of 2017.

The business climate in the country will be very positive and ranks third in the Doing Business 2017 survey behind New Zealand and Singapore.

 

Last update : January 2017

Payment

 

Like the cheque, the bill of exchange is not frequently used in Denmark. Both are an embodiment and, therefore, an acknowledgement of debt.

 

Accepted but remaining unpaid bills and cheques are legally enforceable instruments that exempt creditors from obtaining a court judgement. In such cases, the “judge-bailiff” (Fogedret) is appointed to oversee enforcing attachment. First, however, the debtor is summonsed to declare his financial situation for the purposes of determining his ability to repay the debt. It is a criminal offence to make a false statement of insolvency.

 

Bank transfers are the most commonly used means of payment. All major Danish banks use the SWIFT network – a rapid and efficient payment of domestic and international transactions.

 

Debt collection

 

Out-of-court collection begins with the creditor or his legal counsel sending debtor a final demand for payment by recorded delivery or ordinary mail in which the latter is given ten days to settle the principal amount, plus any interest penalties provided for in the agreement.

 

Where there is no such clause agreed by the parties, the rate of interest applicable to commercial agreements contracted after 1st August 2002 is the Danish National Bank's benchmark or lending rate (udlånsrente) in force on 1st January or 1st July of the year in question, plus seven percentage points.

 

It should also be noted that, where the due date for payment is not complied with, any settlement or acknowledgement of debt negotiated at this stage of the recovery process is directly enforceable, on condition that an enforcement clause is duly included in the new settlement or agreement.

 

Since 1st January 2005, past due debts not exceeding 50,000 Danish kroner (DKK), reputed to be uncontested, are handled via a simplified collection procedure (forenklet inkassoprocedure): The creditor submits an injunction form directly to the judge-bailiff for service on the debtor. If there is no reaction within 14 days, an enforcement order is issued.

 

For claims that are not settled out of court, creditors usually engage a lawyer to defend their interests, even though Danish law allows plaintiffs and defendants direct representation in court. Unlike other countries, Denmark has only one type of legal professional: lawyers (i.e. there are no notaries, barristers, bailiffs-at-law, etc.).

 

Where debtor fails to respond to a demand for payment or where the dispute is not serious, creditor may obtain, usually after three months time, a judgement following an adversarial hearing or a judgement by default ordering the debtor to pay ; in the present case, the debtor may be requested, within 14 days, to pay the principal amount plus interest and expenses, which include court fees and, where applicable, a contribution to the creditor’s legal costs.

 

The legal system reform effective since 1st January 2007 is intended to speed up procedures and provide citizens with a more homogeneous and better quality service.

 

All cases, whatever the size of the claim involved, whether they are complex or disputed, are heard by the court of first instance (Byret) – presided by a three-judge panel or one judge assisted by experts – and entail both written and oral procedures.

 

Appeals on claims exceeding 10,000 Danish kroner (DKK) are heard by one of two regional courts: the Vestre Landsret in Viborg (competent for the Jutland area) or the Østre Landsret in Copenhagen (competent for the rest of the country).

 

Exceptional cases involving questions of principle can, however, be submitted directly to one these two regional courts.

 

The proceedings here involve a series of preliminary hearings, in which the parties present written submissions and proofs, and a plenary hearing, in which the court hears witness testimonies and the parties’ arguments.

Court costs depend on the value of the claim and, in general, the party who loses the case bears the legal costs.

 

Denmark does not have a system of commercial courts outside the Copenhagen area, which has a maritime and commercial court (Sø-og Handelsretten) presided by a panel of professional and non-professional judges competent to hear cases involving commercial and maritime disputes, competition law, insolvency proceedings and finally international trade cases.

Insolvency trend Denmark
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