Economy of Denmark
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Denmark's industrialized market economy depends on imported raw materials and foreign trade. Within the European Union, Denmark advocates a liberal trade policy. Its standard of living is among the highest in the world, and the Danes devote 0.8% of GNI to foreign aid.
Denmark is self-sufficient in energy - producing oil, natural gas, wind- and bio-energy. Its principal exports are machinery, instruments and food products. The U.S. is Denmark's largest non-European trading partner, accounting for about 5% of total Danish merchandise trade. Aircraft, computers, machinery, and instruments are among the major U.S. exports to Denmark. There are some 250 U.S.-owned companies in Denmark. Among major Danish exports to the U.S. are industrial machinery, chemical products, furniture, pharmaceuticals, and canned ham and pork.
From 1982, a center-right government corrected accumulated economic pressures, mainly inflation and balance-of-payments deficits, but lost power in 1993 to a Social Democratic coalition government led by Poul Nyrup Rasmussen, who remained in office following the March 1998 election. The government of Poul Nyrup Rasmussen had success in cutting official unemployment, which peaked at 12.5% and is now below 5.5 %. Average annual growth rates are now 2-3%. In November 2001, a center-right government led by Anders Fogh Rasmussen won the election on maintaining the current tax level, and improving the overall administrational efficiency.
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The Danish model
For the last two years (2004 and 2005) the danish economy has been surprisingly strong - surplus on the national budget is expected to be 39 billions DKK for 2006. The government of Denmark is using most of this surplus to reduce the national debt. At the end of March 2006 a report from the Danish National Bank said that the foreign debts to Denmark were now bigger than the Danish foreign debt, effectively nullifying the foreign debt.
Meanwhile, the European Union has investigated Denmark as a possible model for a future European social model [1]. The term, dubbed Flexicurity, is based on the relatively flexible labour model in Denmark where frequent job changes are not uncommon coupled with the the extensive social security net offered by the Danish social welfare policies.
Welfare state
Danes are proud of their highly developed welfare safety net, which ensures that all Danes receive free health care and need not fear real poverty. Over the last 20 years, however, the number of Danes living on transfer payments has grown to about 1 million working-age persons (roughly 20% of the population), and the system is beginning to show strains. Health care and care for the elderly particularly have suffered, and the need for welfare reform is increasingly discussed. More than one-quarter of the labor force is employed in the public sector. Thus 61% of the adult population in Denmark is either living of transfer payments or employed by the government (2005).
The large public sector is financed through high taxes. A Value added tax of 25% is levied on the sale of most goods and services (including groceries). The income tax in Denmark ranges from 9%-44% for ultra-low to low-income families to 44%-62% progressively for middle class families. 850,000 Danes (31% of everyone employed and 44% of all full-time employees) pay a marginal income tax of 62%. The number of Danes paying a marginal income tax of 62% in 2006 is expected to be 925,000.
Greenland and the Faroe Islands
- Main articles: Economy of the Faroe Islands and Economy of Greenland
Greenland suffered negative economic growth in the early 1990s, but since 1993 the economy has improved. A tight fiscal policy by the Greenland Home Rule Government since the late 1980s helped create a low inflation rate and surpluses in the public budget, but at the cost of rising foreign debts of the Home Rule Government's commercial entities. Since 1990, Greenland has registered a foreign trade deficit.
Following the closure of Greenland's last lead and zinc mine in 1989, Greenland's economy is solely dependent on the fishing industry and Danish grants. Despite resumption of several interesting hydrocarbon and mineral exploration activities, it will take several years before production may materialize. Greenland's shrimp fishery is by far the largest income earner, since cod catches have dropped to historically low levels. Tourism is the only sector offering any near-term potential, and even this is limited due to the short season and high costs. The public sector plays a dominant role in Greenland's economy. Grants from mainland Denmark and EU fisheries payments make up about one-half of the home-rule government's revenues.
The Faroe Islands also depend almost entirely on fisheries and related exports. Without Danish Government bailouts in 1992 and 1993, the Faroese economy would have gone bankrupt. Since 1995, the Faroese economy has seen a noticeable upturn, but remains extremely vulnerable. Recent off-shore oil finds close to the Faroese area give hope for Faroese deposits, too, which may lay the basis for an economic rebound over the longer term.
Economy - overview
This thoroughly modern market economy features high-tech agriculture, up-to-date small-scale and corporate industry, extensive government welfare measures, comfortable living standards, and high dependence on foreign trade. Denmark is a net exporter of food. The center-left coalition government is concentrating on reducing the unemployment rate and turning the budget deficit into a surplus, as well as following the previous government's policies of maintaining low inflation and a current account surplus. The coalition also vows to maintain a stable currency. The coalition has lowered marginal income tax rates while maintaining overall tax revenues; boosted industrial competitiveness through labor market and tax reforms; increased research and development funds; and improved welfare services for the neediest while cutting paperwork and delays. Denmark chose not to join the 11 other European Union members who launched the euro on 1 January 1999.
National accounts
GDP:
Table showing selected PPP GDPs and growth - 2002 to 2006 est.:
| Year | GDP in billions of USD PPP | % GDP Growth |
|---|---|---|
| 2002 | 166.876 | 0.5 |
| 2003 | 170.798 | 0.7 |
| 2004 | 178.477 | 2.4 |
| 2005 | 187.721 | 2.2 |
| 2006 | 195.581 | 2.1 |
purchasing power parity - $178.477 billion (2004 est.)
GDP - real growth rate: 2.4% (2003 est.)
GDP - per capita: purchasing power parity - $30,600 (2004 est.)
GDP - composition by sector:
agriculture:
2%
industry:
22.1%
services:
75.9% (2003 est.)
Population below poverty line: NA%
Household income or consumption by percentage share:
lowest 10%:
2%
highest 10%:
24% (2000 est.)
Inflation rate (consumer prices): 2.1% (2003 est.)
Labor force: 2.863 million (2003 est.)
Labor force - by occupation: services 79%, industry 17%, agriculture 4% (2002 est.)
Unemployment rate: 6.1% (2003)
Budget:
revenues:
$118.5 billion
expenditures:
$116 billion, including capital expenditures of $500 million (2003 est.)
Industries: food processing, machinery and equipment, textiles and clothing, chemical production, electronics, construction, furniture, and other wood products, shipbuilding, windmills
Industrial production growth rate: 0.3% (2003 est.)
Electricity - production: 35,470 GWh (2001)
Electricity - production by source:
- fossil fuel: 82.7%
- hydro: 0.1%
- other: 17.3% (2001)
- nuclear: 0%
Electricity - consumption: 32,410 GWh (2001)
Electricity - exports: 8,775 GWh (2001)
Electricity - imports: 8,199 GWh (2001)
Agriculture - products: grain, potatoes, rapeseed, sugar beets; beef, dairy products; fish
Exports: $49.5 billion (f.o.b., 1999)
Exports - commodities: machinery and instruments, meat and meat products, fuels, dairy products, ships, fish, chemicals, windmills
Exports - partners: Germany 18.7%, Sweden 12.6%, UK 8.5%, United States 6.2%, Norway 5.7%, France 5.1%, Netherlands 4.7% (2003)
Imports: $54.47 billion f.o.b. (2003 est.)
Imports - commodities: machinery and equipment, petroleum, chemicals, grain and foodstuffs, textiles, paper
Imports - partners: Germany 23.1%, Sweden 13%, UK 7%, Netherlands 6.9%, France 4.9%, Norway 4.5%, Italy 4.1% (2003)
Debt - external: $14.7 billion (2005), $21.7 billion (2000)
Economic aid - donor: ODA, $1.63 billion (1999)
Currency: 1 Danish krone (DKK) = 100 øre
Exchange rates: Danish kroner per US dollar - 6.18 (2006), 6.5877 (2003), 7.8947 (2002), 8.3228 (2001), 8.0831 (2000), 6.9762 (1999)
Fiscal year: calendar year
Seaports: Aalborg, Aarhus ....
See also
External links
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