The Danish economy is recovering strongly from the COVID-19 crisis, with growth of 4.7% this year, projected to ease to 2.4% in 2022 and 1.7% in 2023. A rapid rebound in private consumption as the economy reopened from March saw GDP and employment exceed their pre-crisis levels in the second quarter of 2021. Further virus outbreaks are the major risk, but there are also upside risks to growth and inflation if households choose to spend excess savings accumulated during the crisis and labour shortages become more persistent.
Exceptional fiscal support is being removed as the economy recovers, with DKK 4 billion (0.17% of GDP) set aside in 2022 for further COVID-19-related measures. The government should be ready to step in with more substantial targeted support if a deterioration of the health situation threatens the recovery, or to tighten macroeconomic policy in case of overheating. Further policy measures are under consideration and will be necessary for Denmark to meet its target to reduce greenhouse gas emissions by 70% by 2030 and to manage adverse outcomes for vulnerable households.