2012-10-12 15:48:20 - New Country Reports market report from Business Monitor International: "Denmark Business Forecast Report Q4 2012"

Core Views As it stands, growth in Denmark over the next couple of years is set to be unremarkable. Despite a foray into technical recession in the last couple of quarters of 2011, we do not expect an economic contraction to play out over the course of 2012, as fiscal investment and a resilient household sector are likely to prop up growth. However, we do not expect robust economic growth given still-weak economic confidence, an ailing domestic banking sector and continued housing market weakness. Moreover, ongoing troubles in the eurozone economy will have huge knock-on effects on the Danish economy given the latter's heavy trade and investment links with the common currency area. The release of the governing coalition's 2020

plan is positive for Denmark's long-term economic and investment prospects - the main objective being to boost growth and employment within the private sector while seeking a steady streamlining of public sector services. However, given the coalition's lack of a parliamentary majority, we expect a lengthy negotiating period with other political parties and a potential watering down of many policies. In turn, this could raise doubts over the political cohesion of the coalition government. The government also faces an tough economic environment, particularly given the increasingly precarious state of affairs in the eurozone. Major Forecast Changes There are no major forecast changes this quarter. Key Risks To Outlook The biggest risk to Denmark's medium-term macroeconomic trajectory stems from ongoing economic and financial developments within the eurozone. Denmark has sizeable trade and investment links with the common currency bloc, and a major deterioration in growth in countries such as Germany and France would almost certainly push Denmark back into recessionary territory this year. Alongside a major deterioration in economic prospects due to events in the eurozone, difficulties in passing legislation (owing to its lack of parliamentary majority) as well as a continued slide in opinion polls could begin to place greater strain on the governing coalition's political cohesion. In turn, this could raise the potential for a break-up of the government and fresh elections being called further down the line. Business


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