Danish central bank raises GDP outlook

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Danmarks Nationalbank has raised its GDP growth forecast for the Danish economy, noting that it has been in recovery “for some time already”.

GDP growth is forecast at 2% this year and expected to be 2.1% in 2016 and 1.8% in 2017. This means the bank has upped its 2015 forecast by 0.3%, or 30 bps, since its last official outlook was published, and increased its 2016 outlook by 0.1%

The bank explained its adjustments by noting that: “Recent years’ structural reforms should result in a steady increase of the labour force in order to ensure a sustainable development in the labour market and in wage formation.”

“Overall, consumer prices have not risen over the last year. This is primarily attributable to the pronounced fall in oil prices since the summer, which also boosts household purchasing power. There is no risk of deflation as core inflation remains positive and wage growth is accelerating slightly.”

“On the other hand, there is reason to keep an eye on the housing market as there is a risk that a prolonged period of very low interest rates could trigger an unhealthy development with self-reinforcing price increases for owner-occupied housing. This highlights the need for automatic stabilisers in the housing market.”

According to the bank’s data, Denmark’s HICP rate of inflation is forecast for 0.5% in 2015, rising to 1.8% in 2016 and 1.9% in 2017. These figures suggest the bank has cut 0.3% off its previous inflation forecast for 2015, but raised it by 0.1% for 2016. The 2017 forecast has not previously been published.

 

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