Danish current account surplus falls, increased investment likely to boost welfare level

Denmark’s current account surplus fell by one-third from its peak in 2015. However, since the decline is because of increased investment activity, it is good news. In the past years, the current account surplus has fallen sharply in Denmark. The surplus for the last 12 months reached DKK 124 billion, which gauged as a percentage of GDP is the lowest level over the past nearly 8 years, noted Nordea Bank. Comparatively, the Danish current account surplus surpassed DKK 190 billion in mid-2015.

Meanwhile, the savings surplus of non-financial services companies has fallen sharply, by a total of over DKK 100 billion from the 2015 peak. The fall in corporate savings surplus shows that business investment is regaining momentum in earnest. On an annual basis, business investment grew over DKK 50 billion since 2015m corresponding to a rise in the investment rate of over 2 percentage points. The solid growth in the second quarter was linked to large investments in vessels that are unlikely to be repeated in subsequent quarters, stated Nordea Bank.

However, the household savings surplus continues to increase. The household savings surplus for the last year came in at DKK 41 billion. Meanwhile, the rise in business investment is good news for the Danish economy. As the IMF has noted previously, the low investment activity in Denmark after the financial crisis is attributed to the subdued trend in productivity. This trend appears to have reversed, and Denmark’s businesses are now investing more rather than saving more.

“Over time this could contribute to reversing the past years’ downtrend in labour productivity and ultimately contribute to boosting the long-term growth potential of the Danish economy”, added Nordea Bank.