Denmark’s GDP per capita is one of the highest in the OECD, reflecting relatively high productivity levels. Productivity growth remained broadly in line with the highest rates in the OECD and investment has recovered since the pandemic. However, productivity growth in the domestic economy has been modest in recent years, the strong overall growth being mainly driven by large firms operating abroad. While labour participation converged to the upper OECD average, there is room for employment rates to rise further.

Youth employment could be raised by better educational support reducing school dropout rates, segregation and performance gaps. Improving prevention and efficiency in healthcare and long-term care sectors could help tackle demographic challenges and further raise productivity. Innovation capacity, investment and hence productivity growth would benefit from better coordination of research and development initiatives and improved regulatory frameworks.

Denmark has a growth-friendly business environment, a strong labour market and sound public finances but still faces challenges. The economy has run at two speeds, mainly driven by multinational firms, while domestic demand and productivity growth have been weak. Although public debt is low and the fiscal framework is strong, improving spending efficiency and priorities over the longer term would help manage budget pressures created by population ageing, climate change and national security requirements. Denmark is at the forefront of climate mitigation policies and is on track to meet its 2030 climate targets. However, a comprehensive strategy for climate change adaptation and adequate investment in risk prevention are needed to improve climate resilience and address exposures to flooding, storm surges and coastal erosion. Policy reform can further improve Denmark’s high livings standards. Reducing barriers for people to realise their family plans requires addressing remaining gaps in family policies and services, notably improving childcare quality. Reforms of property taxation, building regulation, social housing and rent controls, can help to raise housing supply, ease affordability issues in urban areas and support residential mobility.

SPECIAL FEATURES: FAMILY; HOUSING; CLIMATE POLICIES

Further reading

• Carbon pricing in Denmark: how does it work? – Blog
• Building a better housing market in Denmark: a reform package to improve efficiency, raise supply and enhance affordability, Blog post
• Press Release | DNK
• Read the survey and access previous releases