Economy of Denmark - Overview

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 (1993–2001) 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. The availability and duration of unemployment benefit has been restricted to four years and because of rapidly rising prices on housing this has led to an increase in poverty from below 4% in 1995 to 5% in 2006 according to the Danish Economic Council . Despite these cuts, the part of the public sector in Denmark which buys goods and services from the private sector and provides the public sector administration and direct service to the public - nursing institutions for the young or old, hospitals, schools, police, and so on. - has risen from 25.5% of GDP during the former government to 26% today and is projected to be at 26.5% in 2015 if current policies continue .

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 labour 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.