Economy may be headed back into recession

Country’s economy shrinks more than expected in new figures

March 4th, 2013 5:22 pm| by admin

After predictions that Denmark’s stagnating economy would grow in 2013, the country may be on its way back towards a recession.

According to new figures reported by Bloomberg Business Week, the nation suffered its worst economic decline in several years in the last quarter of 2012. The country’s gross domestic product went down by 0.6 percent last year, the largest decline since 2009. In the fourth quarter alone, the economy declined 0.9 percent, three times more than estimated.

The data fuelled fears that Denmark may return to a recession – defined by two consecutive quarters of negative growth – after a tumultuous year of growth and decline in 2012.

“The Danish economy is taking a beating on two fronts,” Niels Roehnholdt, a senior economist at Jyske Bank, told Bloomberg. “Foreign demand suffered from Europe’s crisis, while private consumption declined due to domestic households increasing their savings. The light in the dark is employment, which improved slightly.”

The January unemployment rate was down to six percent from 6.1 percent in December. Total investments and public spending both rose by 0.3 percent in the last quarter, while both exports and housing construction fell by 1.6 percent. Consumer spending also fell 0.1 percent.

While the economy minister, Margrethe Vestager (Radikale), was optimistic last year about economic growth in 2013, she said the new figures indicated the troubles are far from over.

"This underlines that we have a long way out of the crisis, and that it will be heavily influenced by developments abroad," Vestager said in a statement in reference to the decline in exports.

However, Helge Pedersen, the head economist at Nordea Bank, applauded the government’s efforts to boost the economy last week via its growth and jobs bill.

“Once again the Danish economy is halfway into a recession,” Pedersen told Bloomberg News. “On that backdrop there’s reason to commend the government for the timing of its growth plan.”

The government's reforms from last week including cutting corporate taxes, business costs and student funding (SU) in order to boost the economy.  

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