The prospects for economic growth in Denmark next year are uncertain,
according to the government’s Economic Council, which presented its autumn
In fact, the report suggests that Denmark may still be treading water in 2014
– among other reasons due to sluggish economic recovery in Europe.
And although a fiscal policy injection could benefit the economy in 2013, the
council’s Wise Men are advising against the idea.
“The sluggish economic development suggests there could be basis for a fiscal
policy relaxation in 2013, but that could give us problems with EU
requirements and we advise against it,” says Economic Council Chairman Prof.
Hans Jørgen Whitta-Jacobsen of Copenhagen University.
“Denmark has already gone far in its creative stimulation, and the limit has
probably been reached,” he adds.
The council report suggests that economic activity will continue to be below
normal levels after 2014.
“There is much to indicate that fiscal policy stimulation should be held back
until 2014 and onwards when there may be a need to stimulate the economy,”
The Wise Men see growth in Denmark at 0.2 per cent – a full percentage point
below their forecast six months ago. Next year, the council says its
uncertain forecast is growth at 1.6 per cent.
Whitta-Jacobsen’s reference to the European Union refers to the current
centre-left government’s plans for fiscal policy measures in order to be
able to live up to the EU’s convergence criteria of a public deficit of
under three per cent.
The Economic Council report also forecast unemployment this year at 165,000
increasing by 9,000 next year to 174,000.
Addressing the politically controversial issue of unemployment benefits, the
Economic Council suggests a flexible, rule-based unemployment benefit
system, which follows market conditions.
“We are suggesting a market-dependent unemployment benefit system with longer
periods of payment in times of low economic activity than when activity is
high,” Whitta-Jacobsen says.
The Economic Council says that the length of time during which unemployment
benefit is paid should be determined by a set of clear rules, and not be
left to the whim of politicians.
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