World Economy

Denmark Cuts Growth Outlook

Denmark Cuts Growth OutlookDenmark Cuts Growth Outlook

Denmark’s government cut its growth forecasts for this year and next as Scandinavia’s smallest economy struggles to cope with international headwinds exacerbated by Britain’s decision to leave the European Union.

Gross domestic product will expand 0.9% in 2016, compared with a May forecast for 1.1%, according to government documents seen by Bloomberg. GDP in 2017 will grow 1.5%, versus the 1.7% predicted just three months ago. The revised outlook is due to be published on in Copenhagen.

“Overall, the growth outlook for the international economy has been downgraded slightly following the prospect of slightly slower growth in Europe in 2017 due to Brexit,” the government said in the documents. Still, the turmoil instantly following the June referendum has eased while record-low interest rates have supported growth, the government said.

To deal with the economic slowdown, the minority government of Prime Minister Lars Loekke Rasmussen is planning to cut taxes across income brackets, according to a posting on his Facebook page released late on Monday. State broadcaster DR reported earlier that Rasmussen is planning measures that will increase employment by almost 250,000 people and release 65 billion kroner ($9.8 billion) in funds targeting growth through 2025.

Meanwhile, the government is cutting its forecast for how much it will borrow, and predicts a domestic financing need for next year of just 94 billion kroner ($14 billion), which is about 28% lower than 2016’s requirement.

“The reduced borrowing need can mean that the national debt office will lower the target for Danish government bond issuance in 2017,” Jan Stoerup Nielsen, a senior analyst at Nordea Markets, wrote in a note. The issuance target for 2016 is unlikely to change, he said.

Danish consumer confidence in the job market and the economy was the highest in Europe for the second quarter of 2016, according to a survey by Nielsen. The survey comprised 30,000 respondents from more than 60 countries, answering questions about jobs, economy, and future outlooks on private consumption.

The report shows that consumer confidence improved across all the Nordic countries in comparison with the first quarter. Denmark’s score increased seven points to 112, Sweden and Norway each recorded a four-point rises to 90 and 82 respectively, and Finland’s score increased by one point to 64.