Estudos Económicos
Denmark

Denmark

Population 5,6 million
GDP 60,947 US$
A2
Country risk assessment
A1
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Synthesis

major macro economic indicators

  2013 2014 2015(f)  2016(f)
GDP growth (%) -0.2 1.3 1.2 1.2
Inflation (yearly average) (%) 0.8 0.3 0.3 1.5
Budget balance (% GDP) -0.9 -1.2 -2.4 -2.3
Current account balance (% GDP) 7.2 6.3 6.2 6.3
Public debt (% GDP) 45.0 45.2 46.9 47.5

 

(f) Forecast

STRENGTHS

  • The world’s fifth biggest sea carrier      
  • Energy self-sufficiency (Oil in the North Sea and Greenland) and net energy exporter
  • Niche industries (renewable energy and biotechnology)
  • Current account surplus

WEAKNESSES

  • Open economy sensitive to external demand
  • Erosion of the competitiveness of manufacturing businesses
  • Very high level of household debt (290% of disposable income)
  • Public sector strongly represented in employment (30% of the workforce)

Risk assessment

Economic growth is sustained by exports and domestic demand

 

GDP growth is expected to rise in 2016 as in 2015. Exports and domestic demand will continue as the main determinants of growth. On the one hand, exports will benefit from the improved (though still modest) economic picture in the euro zone and, more broadly, in its main EU partner countries, from the depreciation of the Danish krone against the dollar and the rise in productivity. On the other hand, weak inflation, higher property prices (wealth effect), the renegotiation of mortgages (lower interest rates) and the falling unemployment rate (6.2% of the workforce in 2015) will boost household consumption. Nonetheless, high household debt levels (290% of disposable income, the highest ratio in the OECD) will keep consumption in check. Regarding the sectors, the oil sector will be hit by the low oil prices, leading to lower output and investments; the pharmaceutical sector will be sustained by household consumption and finally, infrastructure projects will sustain the construction sector.

The Transatlantic Trade and Investment Partnership (TTIP), currently being negotiated between the European Union and the United States, could be an opportunity for growth, exports and jobs.

The Danish central bank's accommodative monetary policy (key interest rate: 0%; CD rates: -0.75% since February 2015) will persist in the short term, given weak inflation and the Danish krone's pegging to the euro. This policy has helped maintain export competitiveness and supporte domestic demand. Nevertheless, upside property price tensions created by cheap credit will continue to be a risk for the authorities to monitor.

 

Low debt, high current account surplus

 The government has set out three priorities for its 2016 budget: greater public spending on health and pensions, higher transfers to rural regions (consequence of the sharp drop in the price of milk, which accounts for almost 20% of Danish agricultural output) and labour market reform (in particular by means of cuts to unemployment benefit). As a result, the government will reduce development aid (0.7% of GDP) and the research, education and culture budget in order to limit the increase in the public deficit. Managing the public deficit will, however, be one of the government's priorities with the aim of bringing the structural deficit down to below -0.5% of GDP in 2016, compared with -0.9% of GDP in 2015. The gradual raising of the retirement age will also help bring down the deficit in the short term. Denmark's public debt level is low, which enables it to increase its public deficit from time to time, as was the case in 2015.

The Danish current account surplus will remain stable in 2016. This is explained mainly by dynamic exports, buoyed by the depreciation of the krone, pegged to the euro, which will be offset by imports stimulated by consumption. Meanwhile, the capital account balance will remain positive and stable in 2016.

 

Parliamentary elections won by right-wing party 

Lars Lokke Rasmussen was elected Prime Minister in the last parliamentary elections in June 2015, for a term of four years. The right-wing bloc (representing all the parties on the right, such as Venstre, the Prime Minister's Party and the extreme right-wing Danish People's Party (DPP)) won a parliamentary majority against the left-wing bloc, made up in particular of the Social Democratic Party (SD), which obtained the most votes. Under the Danish parliamentary system, a party from the majority bloc governs. Having won fewer votes than the DPP, Venstre will lead the government as it is considered more consensual, but will have to rely on the extreme right-wing party to govern. Nonetheless, no member of government has been drawn from the DPP and significant differences between the DPP and Venstre (over tax reform, the role of the EU) could weaken the alliance between the two parties and spark early elections, without real risk since Denmark is one of the most politically stable countries.

Greenland's desire for independence (the Arctic being a region potentially rich in natural resources) will pose a significant challenge which Denmark will have to deal with in the medium term.

Note that Denmark was third in the World Bank's most recent Doing Business rankings thanks especially to the simplicity of the process for setting up a new business. 

 

(Last update : January 2016 ) 

Payment

 

Like the cheque, the bill of exchange is not frequently used in Denmark. Both are an embodiment and, therefore, an acknowledgement of debt.

 

Accepted but remaining unpaid bills and cheques are legally enforceable instruments that exempt creditors from obtaining a court judgement. In such cases, the “judge-bailiff” (Fogedret) is appointed to oversee enforcing attachment. First, however, the debtor is summonsed to declare his financial situation for the purposes of determining his ability to repay the debt. It is a criminal offence to make a false statement of insolvency.

 

Bank transfers are the most commonly used means of payment. All major Danish banks use the SWIFT network – a rapid and efficient payment of domestic and international transactions.

 

Debt collection

 

Out-of-court collection begins with the creditor or his legal counsel sending debtor a final demand for payment by recorded delivery or ordinary mail in which the latter is given ten days to settle the principal amount, plus any interest penalties provided for in the agreement.

 

Where there is no such clause agreed by the parties, the rate of interest applicable to commercial agreements contracted after 1st August 2002 is the Danish National Bank's benchmark or lending rate (udlånsrente) in force on 1st January or 1st July of the year in question, plus seven percentage points.

 

It should also be noted that, where the due date for payment is not complied with, any settlement or acknowledgement of debt negotiated at this stage of the recovery process is directly enforceable, on condition that an enforcement clause is duly included in the new settlement or agreement.

 

Since 1st January 2005, past due debts not exceeding 50,000 Danish kroner (DKK), reputed to be uncontested, are handled via a simplified collection procedure (forenklet inkassoprocedure): The creditor submits an injunction form directly to the judge-bailiff for service on the debtor. If there is no reaction within 14 days, an enforcement order is issued.

 

For claims that are not settled out of court, creditors usually engage a lawyer to defend their interests, even though Danish law allows plaintiffs and defendants direct representation in court. Unlike other countries, Denmark has only one type of legal professional: lawyers (i.e. there are no notaries, barristers, bailiffs-at-law, etc.).

 

Where debtor fails to respond to a demand for payment or where the dispute is not serious, creditor may obtain, usually after three months time, a judgement following an adversarial hearing or a judgement by default ordering the debtor to pay ; in the present case, the debtor may be requested, within 14 days, to pay the principal amount plus interest and expenses, which include court fees and, where applicable, a contribution to the creditor’s legal costs.

 

The legal system reform effective since 1st January 2007 is intended to speed up procedures and provide citizens with a more homogeneous and better quality service.

 

All cases, whatever the size of the claim involved, whether they are complex or disputed, are heard by the court of first instance (Byret) – presided by a three-judge panel or one judge assisted by experts – and entail both written and oral procedures.

 

Appeals on claims exceeding 10,000 Danish kroner (DKK) are heard by one of two regional courts: the Vestre Landsret in Viborg (competent for the Jutland area) or the Østre Landsret in Copenhagen (competent for the rest of the country).

 

Exceptional cases involving questions of principle can, however, be submitted directly to one these two regional courts.

 

The proceedings here involve a series of preliminary hearings, in which the parties present written submissions and proofs, and a plenary hearing, in which the court hears witness testimonies and the parties’ arguments.

Court costs depend on the value of the claim and, in general, the party who loses the case bears the legal costs.

 

Denmark does not have a system of commercial courts outside the Copenhagen area, which has a maritime and commercial court (Sø-og Handelsretten) presided by a panel of professional and non-professional judges competent to hear cases involving commercial and maritime disputes, competition law, insolvency proceedings and finally international trade cases.

Insolvency trend Denmark
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