Denmark to face smaller recession than EU
COPENHAGEN: Denmark’s economy will contract less than the European Union (EU) on average this year, after it eased restrictions on movement earlier than many other countries.
Gross domestic product will shrink 5.3% in 2020, the Finance Ministry in Copenhagen said, according to documents seen by Bloomberg before the official publication.
By contrast, the EU is set to contract more than 7%.
“The world has changed drastically in the past half year,” Finance Minister Nicolai Wammen said in the documents.
“The coronavirus epidemic has turned our daily lives upside down. The global economy has ground to a halt.”
After imposing a strict lockdown before many other countries in Europe, Denmark last month started rolling back its curbs on movement, and has since reopened much of the economy amid signs the contagion rate has slowed.
As of Monday, the country had reported 563 Covid-19 related deaths, and its fatality rate per 100,000 is just under a quarter that of Sweden.
Wammen said the situation remains “serious.” And he warned that the Covid-19 crisis “will in all likelihood affect the Danish economy for several years into the future. But we’ve laid the stones for a path out of the crisis and we’ve already taken the first important steps.”
Denmark will need to generate more than three times the funding previously estimated to help deal with the fallout from Covid19.
The financing need will rise to 294 billion kroner (Us$43bil) this year, compared with a December estimate for 87 billion kroner, according to a statement late on Monday.
The government will need to tap bond markets and its account at the central bank to generate the cash, it said.
“This shows how huge the bill is,” said Jan Storup Nielsen, chief analyst at Nordea Markets in Copenhagen.
“We’ve never before seen such an upward adjustment.” Aaa-rated Denmark has so far been able to tap markets at historically low rates. Its benchmark 10-year bond trades at a negative yield, and its entire yield curve up to 20 years traded below zero not that long ago.
“It used to be the case in Denmark that the biggest headache was finding an excuse to sell government bonds,” Nielsen said.
“Now we find ourselves in a situation in which we need to get more than 10% of GDP via the market.”