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Danish economy grows strongly in Q4 2018, household consumption likely to drive growth in 2019

Denmark’s economy expanded at a rapid rate in the second half of 2018 with annual growth above 2 percent. The flash indicator showed that the Danish economy grew 0.8 percent in the fourth quarter. This corresponds to an annual growth rate of 2.3 percent, which is above the long-term potential growth rate currently estimated to be at about 1.5 percent. The solid quarterly growth in the fourth quarter was remarkably given a strong rise in the third quarter of 0.7 percent. Taken together this highlights the picture of a solid recovery in Danish GDP in the second half of 2018 after reaching a soft spot at the start of 2018.

Manufacturing production and transport mainly drove the economic growth in the fourth quarter. In the manufacturing sector especially pharmaceutical production rose greatly. Meanwhile, construction contributed positively to the GDP growth. Meanwhile, production in the service sector was nearly unchanged.

In spite of the strong rebound in the second half, Danish economy grew by a modest 1.1 percent in the whole of 2018. Therefore, 2018 would be the year with the lowest growth rate since the start of the upswing in 2013. Nevertheless, this setback is to a great degree caused by one-off factors as GDP in 2017 was lifted “artificially” by a patent pay-out/ At a later stage this payment would be probably spread across several quarters, thereby lifting Danish economy by about 0.4 percentage point in 2018.

“In 2019 we expect the Danish economy to grow by around 1¾ percent. Growth will be driven mainly by increased household consumption and growing business investment. This means that the expansion will mainly take place in the domestic part of the economy. The outlook for exports is more uncertain, though, due to mounting protectionism and waning demand among several key trading partners”, said Nordea Bank in a research report.

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