Economy of Denmark - BPB Business Podium Boards: Offshore, Firmengründungen, Beruf & Karriere

jedi · #1 (**permalink**) 03.02.2007, 17:29

Economy of Denmark

Denmark's industrialized market economy depends on imported raw materials and foreign trade. Within the European Union, Denmark advocates a liberal trade policy. Its standard of living is among the highest in the world, and the Danes devote 0.8% of GNI to foreign aid.

Denmark is self-sufficient in energy - producing oil, natural gas, wind- and bio-energy. Its principal exports are machinery, instruments and food products. The U.S. is Denmark's largest non-European trading partner, accounting for around 5% of total Danish merchandise trade. Aircraft, computers, machinery, and instruments are among the major U.S. exports to Denmark. There are some 250 U.S.-owned companies in Denmark. Among major Danish exports to the U.S. are industrial machinery, chemical products, furniture, pharmaceuticals, and canned ham and pork.

From 1982, a center-right government corrected accumulated economic imbalances, mainly inflation and balance-of-payments deficits, but lost power in 1993 to a Social Democratic coalition government led by Poul Nyrup Rasmussen, which remained in office following the March 1998 election. During the governments of Poul Nyrup Rasmussen, there was a drastic fall in official unemployment, which peaked at 12.4% (1993)- and at almost 14% in the winter 1993/94- was 5.2% in 2001 and is (December 2006) 3.9%. This is the lowest level in more than 30 years, making up 107,300 persons. Average annual growth rates are now 2-3.5%. In November 2001, a center-right government led by Anders Fogh Rasmussen won the election on maintaining the current tax level, improving efficiency in the public administration and decreasing the number of immigrants and asylumseekers.

The Danish model

For the past two years (2004 and 2005) the Danish economy has been surprisingly strong - surplus on the national budget is 95.25 billion DKK for 2006 (6% of the GDP). The government is using most of this surplus to reduce the national debt. At the end of March 2006 a report from the Danish (Central) National Bank said that foreign assets owned by companies or individuals from Denmark were now worth more than the Danish foreign debt, effectively nullifying the foreign debt.

Welfare state

Danes are proud of their highly developed welfare safety net, which ensures that all Danes receive free health care and need not fear real poverty. Over the past 20 years, however, the number of Danes living on transfer payments has grown to about 1 million working-age persons (roughly 20% of the population), and the system is beginning to show strains. Health care and care for the elderly particularly have suffered, and the need for welfare reform is increasingly discussed because of the coming sharp decline in the ratio of workers to retirees. More than one-quarter of the labor force is employed in the public sector. Thus 61% of the adult population in Denmark is either dependent on transfer payments, i.e. entitlement benefits, or is employed by government at central, regional or local level (2005). However, only 3.9% (107,300) of Danes are officially unemployed.

The large public sector is financed by high taxes. A Value added tax of 25% is levied on the sale of most goods and services (including groceries). The income tax in Denmark ranges from 9%-44% for ultra-low to low-income families to 44%-62% progressively for middle class families. 850,000 Danes (31% of everyone employed and 44% of all full-time employees) pay a marginal income tax of 62%. The number of Danes paying a marginal income tax of 62% in 2006 is expected to be 925,000.

Greenland and the Faroe Islands

Greenland suffered negative economic growth in the early 1990s, but since 1993 the economy has improved. A tight fiscal policy by the Greenland Home Rule Government since the late 1980s helped create a low inflation rate and surpluses in the public budget, but at the cost of rising foreign debt in the Home Rule Government's commercial entities. Since 1990, Greenland has registered a foreign trade deficit.

Following the closure of Greenland's last lead and zinc mine in 1989, Greenland's economy is solely dependent on the fishing industry and financial transfers from the Danish central government. Despite resumption of several interesting hydrocarbon and mineral exploration activities, it will take several years before production will begin. Greenland's shrimp fishery is by far the largest source of income, since cod catches have dropped to historically low levels. Tourism is the only sector offering any near-term potential, and even this is limited due to the short season and high costs. The public sector plays a dominant role in Greenland's economy. Grants from mainland Denmark and EU fisheries payments make up about one-half of the home-rule government's revenues.

The Faroe Islands also depend almost entirely on fisheries and related exports. Without Danish Government bailouts in 1992 and 1993, the Faroese economy would have gone bankrupt. Since 1995, the Faroese economy has seen a noticeable upturn, but remains extremely vulnerable. Recent off-shore oil finds close to the Faroese area give hope for Faroese deposits, too, which may form the basis for an economic rebound over the longer term.

Economy - overview

This thoroughly modern market economy features high-tech agriculture, up-to-date small-scale and corporate industry, extensive government welfare measures, comfortable living standards, and high dependence on foreign trade. Denmark is a net exporter of food. The center-left coalition government concentrated on reducing the unemployment rate and turning the budget deficit into a surplus, as well as following the previous government's policies of maintaining low inflation and a current account surplus. The coalition also committed itself to maintaining a stable currency. The coalition lowered marginal income tax rates while maintaining overall tax revenues; boosted industrial competitiveness through labor market and tax reforms; increased research and development funds; and improved welfare services for the neediest while increasing public sector efficiency by cutting "red tape". Denmark chose not to join the 11 other European Union members who launched the euro on 1 January 1999. Especially from 2006, economists and political pundits have expressed concern that the lack of skilled labor will result in higher pay increases and an overheating of the economy, which would repeat the boom-and-bust cycle in 1986, when government introduced a tax reform and restricted the private loan market because of a record balance-of-payments deficit. As a consequence, the trade balance showed a surplus in 1987, and the balance-of-payments in 1990 (first surplus since 1963). They have remained in surplus since, except for the balance of payments in 1998.

National accounts

GDP:

Table showing selected PPP GDPs and growth - 2002 to 2006 est.:

Year GDP % GDP Growth
in billions of USD PPP

2002 166.876 0.5
2003 170.798 0.7
2004 178.477 2.4
2005 187.721 3.3
2006 195.581 3.4 (est.)

purchasing power parity - $178.477 billion (2004 est.)

GDP - real growth rate: 2.2% (2007 est.)

GDP - per capita: purchasing power parity - $30,600 (2004 est.)

GDP - composition by sector:
agriculture: 2.3%
industry: 24.9%
services: 71.5% (2006 est.)

Population below poverty line: NA%

Household income or consumption by percentage share:
lowest 10%: 2%
highest 10%: 24% (2000 est.)

Inflation rate (consumer prices): 1.8% (2006 est.)

Labor force: 2.863 million (2003 est.)

Labor force - by occupation: services 73%, industry 24%, agriculture 3% (2006 est.)

Unemployment rate: 3.9% (2006 est.)

Budget:
revenues: $118.5 billion
expenditures: $116 billion, including capital expenditures of $500 million (2003 est.)

Industries: food processing, machinery and equipment, textiles and clothing, chemical and pharmaceutical production, electronics, construction, furniture, and other wood products, shipbuilding, windmills

Industrial production growth rate: 0.3% (2003 est.)

Electricity - production: 35,470 GWh (2001)

Electricity - production by source:

* fossil fuel: 82.7%
* hydro: 0.1%
* other: 17.3% (2001)
* nuclear: 0%

Electricity - consumption: 32,410 GWh (2001)

Electricity - exports: 8,775 GWh (2001)

Electricity - imports: 8,199 GWh (2001)

Agriculture - products: grain, potatoes, rapeseed, sugar beets; beef, dairy products; fish

Exports: $84.95 billion (f.o.b., 2005 est.)

Exports - commodities: machinery and instruments, meat and meat products, fuels, dairy products, ships, fish, chemicals, windmills

Exports - partners: Germany 18.7%, Sweden 12.6%, UK 8.5%, United States 6.2%, Norway 5.7%, France 5.1%, Netherlands 4.7% (2003)

Imports: $74.69 billion f.o.b. (2005 est.)

Imports - commodities: machinery and equipment, petroleum, chemicals, grain and foodstuffs, textiles, paper

Imports - partners: Germany 23.1%, Sweden 13%, UK 7%, Netherlands 6.9%, France 4.9%, Norway 4.5%, Italy 4.1% (2003)

Debt - external: $-7,2 billion (2006), $14.7 billion (2005), $21.7 billion (2000)

Economic aid - donor: ODA, $1.63 billion (1999)

Currency: 1 Danish krone (DKK) = 100 øre

Exchange rates: Danish kroner per US dollar - 6.18 (2006), 6.5877 (2003), 7.8947 (2002), 8.3228 (2001), 8.0831 (2000), 6.9762 (1999)

Fiscal year: calendar year

Seaports: Aalborg, Aarhus ....

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