The country continues to impress with high living standards and employment rates, along with low levels of income inequality, Fund economists have said.
The outlook is for continued solid growth and gradually rising inflation and wages, with output rising above trend to reach 1.7% and 1.9% in 2019 and 2020 respectively.
In an ‘Article IV’ consultation in which the Washington-based fund took stock of Denmark’s recent performance, the IMF heaped fulsome praise on the country.
It commended the authorities for sound economic and social policies that have delivered robust economic performance and high levels of social inclusion.
The Fund said growth remained solid in 2018 and was supported by domestic demand, with the economy operating above potential for the third year in a row.
The labour market is also strong, wage growth has picked up in line with productivity, inflation remains moderate, and strong public finances mean debt is sustainable.
The IMF believes private consumption and investment will be the key drivers of growth in the medium term as a result of structural reforms and higher investment.
However, it warns that risks posed by an expected slowdown in Denmark’s main trading partners could slow export growth – as could a disorderly Brexit as the United Kingdom tries to find a way forward in the impasse over its withdrawal from the European Union.
Moreover, Fund economists point to vulnerabilities caused by high household debt and the impact upon confidence in the financial markets of a high-profile Danish money laundering case.
In May prosecutors charged Thomas Borgen, former chief executive of Danske Bank, over his alleged involvement in one of the world’s biggest money laundering scandals.
The case involves suspicious transactions of about €200bn ($224bn) that passed through Danske Bank’s Estonian branch between 2007 and 2015.
IMF economists said that while the Danish outlook is positive, policies to raise potential growth and enhance macro-financial resilience remained important.
They believe that the country’s fiscal stance should remain neutral, and are encouraging authorities to pursue further efficiency reforms.
