Denmark: Selected Issues

New Zealand: Selected Issues

This Selected Issues paper on Denmark underlies estimates of inefficiencies in the goods and labor markets. The IMF’s new macroeconomic model, the global economic model (GEM), has been used to provide estimates of the impact of successfully implementing the European Council’s ambitious Lisbon reform agenda. GEM incorporates markups in the goods and labor markets that are summary measures of the net impact of all the regulatory structures in an economy. The euro area goods market reform in the service sector is twice that required in Denmark, the euro area must also increase competition in manufacturing.

In recent years, the IMF has released a growing number of reports and other documents covering economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with government officials, is published at the option of the member country.

Selected Issues

This 2018 Article IV Consultation highlights that the Danish economy continues to enjoy solid growth. The output gap has seemingly closed for the first time since the global financial crisis. Unemployment is low and close to its estimated structural level with signs of labor shortages and capacity constraints in some sectors. Inflation remains subdued. Property prices in urban areas are rising swiftly and household debt remains elevated despite recent deleveraging. The increasingly binding constraints highlight Denmark’s reduced growth potential, reflecting structurally weak productivity growth and the post-crisis investment slowdown. The outlook is for continued robust growth, which is projected to exceed its trend in the near term, reaching 2.0 percent in 2018 and 1.9 in 2019.