By Teis Jensen
COPENHAGEN, Aug 23 : Drought-hit agriculture and weak international markets for key companies like Lego, Novo Nordisk and Vestas are set to slow growth in Denmark’s export-driven economy this year.
While Danes have mostly enjoyed an unusually sunny summer, the farming sector, a cornerstone in the country’s rise to prosperity, says weather-related losses could exceed $1.2 billion this year.
High growth rates at several of the country’s largest firms, which helped the nation recover from the 2008 financial crisis, are also fading.
Diabetes drug maker Novo Nordisk, wind turbine maker Vestas, toy maker Lego and jewellery maker Pandora have all seen sales growth slow in the last couple of years.
Danish gross domestic product grew 2.3 percent last year, roughly in line with neighbours Sweden and Germany, to 2,150 billion Danish crowns ($330 billion), a growth rate that isn’t seen as achievable in 2018.
“We won’t get above 1.5 percent this year, if the figures we’ve seen so far from the statistics office are accurate,” said Jan Storup Nielsen, chief analyst at Nordea.
Chief economist at Arbejdernes Landsbank, Signe Roed-Frederiksen, is even more pessimistic, forecasting only around 1 percent growth this year.
Exports have been dented by a strengthening of the euro-pegged Danish crown versus the currencies of key export markets Sweden and Britain. Exports could be further hurt by potential escalations of global trade conflicts.
After a few years above its long-term growth trend of around 1.7 percent the Danish economy is losing momentum now, said Lars Christensen, economist and CEO of Markets & Money Advisory.
“We’re not facing a crisis, but we should be cautious not to expect that the growth rates we’ve seen will continue,” Christensen said.
Danske Bank said that labour shortages also threaten to put a brake on growth as the economy gets closer to its maximum capacity.
“Although the current growth is not impressive it does demand an increase in employment of 3-4,000 persons each month. We can’t keep that up,” chief economist Las Olsen said.
Danish net unemployment is at 3.2 percent, the lowest level since 2009. In the second quarter wages grew by 2.6 percent on the year, the highest growth rate since 2010.
New consumer confidence figures, released on Thursday, show Danes remain relatively optimistic despite the potential slowdown, suggesting that consumer spending, another key pillar of the economy, will hold up for the time being.
Last year’s GDP was boosted by a one-off payment for a patent from a foreign company to a Danish company. Adjusted for that Danish growth figures would have been around 0.4 percent higher this year.