National Bank lowers growth forecast for Danish economy

Denmark’s National Bank has revised down its expectations for growth in the Danish economy in a new forecast.

Gross domestic product (GDP) is now expected to grow by 2 percent in both 2025 and 2026, and by 1.7 percent in 2027. This is a significant decrease compared to the forecast from March, where the growth was estimated at 3.6, 2.3, and 2 percent in the same years.

According to National Bank Governor Christian Kettel Thomsen, the lower growth is due to several factors. A recent revision of Denmark Statistics’ historical GDP figures has provided a weaker starting point for growth in 2025. Additionally, the economy has developed weakly in the first half of the year. Expected negative effects from higher tariff rates are also anticipated to directly dampen exports to the USA and indirectly impact other export markets. Furthermore, a lower growth in the Danish pharmaceutical industry is expected compared to previous years.

“The significantly lower growth reflects several factors. Firstly, Denmark Statistics’ recently revised historical GDP figures provide a weaker starting point for growth in 2025. On top of that, overall growth has been flat in the first half of the year. We also expect to see a negative impact from higher tariffs – both directly through lower exports to the USA and indirectly due to reduced growth in our other export markets, which will also be affected by higher tariffs. Lastly, the progress in the Danish pharmaceutical industry is expected to be lower than in previous years,” says Christian Kettel Thomsen.

Despite the lower growth, the National Bank expects a balanced trajectory in the Danish economy. Capacity pressure is assessed to be neutral, and inflation is expected to remain low in the coming years, meaning that Danish purchasing power will continue to grow.

According to the forecast, fiscal policy is planned to be significantly eased in 2025 and 2026, including increased defense spending, reduction of excise duties, and increased consumption spending in agreements with municipalities and regions. The extent to which these measures affect capacity pressure depends, according to the National Bank, on factors such as the pace and composition of increased defense spending.

“The government plans to significantly ease fiscal policy. However, there is considerable uncertainty about how much fiscal policy will increase capacity pressure in the coming years. If capacity pressure increases significantly, it should be offset by measures to reduce it,” says Christian Kettel Thomsen.

Inflation is expected to reach 1.9 percent in 2025, 1.1 percent in 2026, and 1.8 percent in 2027. In 2026, inflation is dampened by changes in taxes, including lower electricity taxes, which are estimated to reduce inflation by approximately 0.75 percentage points. Core inflation, unaffected by tax changes, is expected to be 1.8 percent in 2025 and 1.7 percent in both 2026 and 2027.

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