Danish economy robust amid global uncertainty, fiscal caution advised

Danmarks Nationalbank assessed the Danish economy as fundamentally in good balance, despite persistent geopolitical uncertainty, ongoing trade conflicts, and rising energy prices.

The central bank's forecast for Danish GDP growth is 1.8 percent for 2026 and 2027, rising to 2.0 percent in 2028.

This outlook contrasts with the Euro area, where the European Central Bank expects lower growth due to the war in the Middle East.

Financial markets are also anticipating higher interest rates as a consequence of the conflict.

However, the Nationalbank notes that the economic consequences for Denmark are expected to be milder than those following Russia's invasion of Ukraine, attributing this to factors such as lower consumer willingness to spend, higher interest rates, and less disrupted global supply chains compared to 2022.

The Nationalbank warns that the Middle East conflict could lead to significantly higher oil and gas prices, resulting in elevated inflation and subdued growth for Denmark.

While housing prices are expected to continue rising by 3.0 percent in 2026, the central bank highlights increased risk accumulation in the Copenhagen housing market.

This is driven by sharply rising prices, higher housing burdens, and growing credit, which could lead to significant price falls.

The incoming government is advised to exercise caution in the 2027 budget, avoiding demand stimulation beyond existing plans and carefully managing fiscal space.