Front Matter Page
IMF Country Report No. 17/158
DENMARK
2017 ARTICLE IV CONSULTATION—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR DENMARK
June 2017
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2017 Article IV consultation with Denmark, the following documents have been released and are included in this package:
A Press Release summarizing the views of the Executive Board as expressed during its June 16, 2017 consideration of the staff report that concluded the Article IV consultation with Denmark.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on June 16, 2017, following discussions that ended on May 10, 2017, with the officials of Denmark on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on May 30, 2017.
An Informational Annex prepared by the IMF staff.
A Staff Statement updating information on recent developments.
A Statement by the Executive Director for Denmark.
The document listed below have been or will be separately released.
Selected Issues
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
International Monetary Fund • Publication Services
PO Box 92780 • Washington, D.C. 20090
Telephone: (202) 623-7430 • Fax: (202) 623-7201
E-mail: publications@imf.org Web: http://www.imf.org
Price: $18.00 per printed copy
International Monetary Fund
Washington, D.C.
© 2017 International Monetary Fund
Front Matter Page
DENMARK
STAFF REPORT FOR THE 2017 ARTICLE IV CONSULTATION
May 30, 2017
Key Issues
Context: The economy is approaching its reduced post-crisis potential and capacity constraints are gradually starting to bind. The outlook is for continued moderate growth though domestic and external risks are substantial. House prices continue to rise, increasing the vulnerability of highly-indebted households, including to interest rate shocks. The current account surplus is declining but remains large. After five years of negative interest rates, banks remain sound and profitable.
Policy recommendations: Economic policies should alleviate capacity constraints and raise potential growth, while containing risks. In particular:
Fiscal policy. With the broadly neutral fiscal stance, prioritizing capacity-enhancing labor market reforms and tax cuts over further consolidation is sensible. However, the authorities should be ready to tighten policies if growth is faster than envisaged. Rebalancing spending toward public investment could help raise potential growth.
Housing. Persistent house price increases call for further policy action on several fronts, including implementing adequate macroprudential tools, reducing adverse tax incentives, and loosening housing supply restrictions.
Labor market. Policies should aim at further raising labor supply, including by following through on earlier planned pension and education reforms, and by improving training for migrants and allowing them to accept work earlier.
Productivity. Addressing high corporate leverage could help revive investment and promoting knowledge-based investment would spur innovation and increase the response of investment to rising demand. Product market reforms also remain key.
Current account. The high surplus reflects corporates’ increasing operations abroad, and low investment at home. High pension savings are also important. While there are no identified policy gaps, recommended policies to slow fiscal consolidation and raise private and public investment would help reduce the surplus.
Approved By
Mahmood Pradhan and Zeine Zeidane
Discussions took place in Copenhagen during May 1–10, 2017. The staff team comprised Messrs. Hofman (head), Papageorgiou, and Xiong, and Ms. Turk. Mr. Scutaru and Ms. Tenali (all EUR) provided support from headquarters. Mr. Gade (OED) joined the discussions. The mission met with Messrs. Rohde and Callesen, Governors of Danmarks Nationalbank; Mr. Jensen, Minister of Finance; Mr. Berg, Head of the DFSA; other senior officials; and representatives from the Danish Economic Council, Statistics Denmark, the Public Employment Service, social partners, and the financial sector.
Contents
CONTEXT
LOW GROWTH MEETS CAPACITY CONSTRAINTS
A MOSTLY BENIGN OUTLOOK, WITH EVOLVING RISKS
POLICIES FOR SUSTAINED GROWTH
A. Macroeconomic Policies—Towards a Neutral Stance
B. Housing Policies—Containing Building Pressures
C. Financial Sector Policies—Underpinning Stability
D. Labor Market Policies—Unlocking Additional Labor Supply
E. Structural Reform—Boosting Investment and Productivity Growth
STAFF APPRAISAL
BOX
1. Labor Productivity in Denmark and Some European Peers
FIGURES
1. Recent Developments
2. Labor Market
3. Housing and Household Debt.
4. External Sector
5. Fiscal Sector
TABLES
1. Selected Economic and Social Indicators, 2013–22
2. Balance of Payments, 2013–22
3. Net International Investment Position, 2010–15
4. Public Finances, 2013–22
5. GFSM 2001 Statement of General Government Operations, 2013–22
6. Financial System Indicators, 2010–16
ANNEXES
I. External Sector Assessment
II. Public Debt Sustainability Analysis
III. Risk Assessment Matrix
IV. Authorities’ Response to Past IMF Policy Recommendations
Front Matter Page
DENMARK
STAFF REPORT FOR THE 2017 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX
May 30, 2017
Prepared By
European Department
(In Consultation with Other Departments)
Contents
FUND RELATIONS
STATISTICAL ISSUES
Front Matter Page
Press Release No. 17/234
FOR IMMEDIATE RELEASE
June 20, 2017
International Monetary Fund
Washington, D.C. 20431 USA
