Denmark’s GDP to grow below 1% in 2016, higher productivity growth necessary to boost investment

In 2015, Denmark’s economic growth has slowed significantly. Overall, the economic growth was unchanged between the first and fourth quarter of 2015. However, other economic indicators, particularly employment, give a positive view of the economy.  More than 20,000 jobs were created in the past year. Firms produced the same amount with additional employees in 2015, as opposed to the usual trend of increasing productivity.

This might be because the firms believe the slowdown in economy to be temporary and are hiring in the likelihood that activity levels will rise in the future, according to Danske Bank. Also, this might also be because the economic growth figures for 2015 are hit by certain random fluctuations that take place on quarterly basis, particularly in a small nation, added Danske Bank. Drop in exports was partially responsible for decline in activity.

The economic growth outlook for 2016 has been significantly revised downwardly to below 1% due to the weak performance in 2015, says Danske Bank. Decline in expectations for global economic growth is also a factor for the bank to reduce its 2016 growth estimate for Denmark.

Denmark’s productivity growth is significantly low. Easing of fiscal policy is not required to boost employment growth as new jobs are being created at the rate of 4000 every month. According to Danske Bank, reforms are required that are consistent with those the Productivity Commission implied, leading to higher growth from greater productivity per employee. Moreover, higher growth in productivity is necessary to boost investment that remains highly subdued, added Danske Bank.