Denmark is one of the most socially stable countries in the world. The Danish economy is based on extensive public welfare programs and extensive social security measures, which contribute to its high standard of living. Over time, an aging population will be an issue. However, Denmark is excellent social safety net and solid economic structure make it less appealing to immigrants than many other European countries.
A current account analysis of the Danish economy reveals that the balance of payments is very positive, with the strong surplus generated by the sale of the Denmark currency and the strong export sector. The Danish currency is strong relative to other major currencies due to the fact that it is one of the few developed countries that have successful free trade agreements with all of its trading partners. The strong external financing position of the Danish economy also contributes to its strong surplus. As for the current international conditions, Denmark’s main trading partners are relatively balanced in terms of trade surplus and the trade deficit.
The Danish central bank has one of the lowest interest rates in the world. The strength of the national currency, together with the solidity of the national fiscal policy, provides a degree of liquidity that has helped the national economy remain dynamic despite the fluctuations in exchange rates. Current estimates by the Danish Statistics Authority indicate that the average real disposable income per household is still above the level of income necessary to cover the costs of an independent Denmark. The current account deficit is very small, currently less than one percent of GDP, making it a low-growing economy.
The Danish labor market continues to outperform many other parts of Europe. Inflation rates are low and unemployment is low. The general trend is that the incomes of the bottom decile continue to grow, while the incomes of the top docile are falling. In the last decade, the gap between the top and bottom income groups has widened notably, while real estate prices have also continued to fall for the overall population. The government has been successful in making housing easier to access and affordable, which have helped the Danish economy to maintain high levels of employment despite the tightening of credit in the global financial crisis.
Another important indicator for the Danish economy has been the contribution made by the agricultural sector to the national economy. The dairy and poultry industries have been growing for many years, providing a consistent flow of domestic output. The small open economy depends on the large volume of exports that are made from the agricultural sectors. With the rise in demand for livestock products, the Danes have become one of the world’s largest exporters of dairy products. Other agricultural sectors include tobacco, sugarcane, hops, vegetables, fruits, tea, coffee, fish, logapers and other agricultural produce.
The Danish farming sector has contributed almost one quarter of the GDP (Gross Domestic Product) of Denmark. The largest single agricultural export is livestock and farming is no exception, with dairy cattle accounting for almost a fifth of the GDF. The other key agricultural export hops, accounting for almost a quarter of the Danish gross national product. Most of the traded agricultural products are traded over the counter, meaning that the Danish exporter must secure an agreed exchange rate before export can take place.
A major contributor to the strength of the Danish economy has been the high level of income transfers received by residents. Income transfers are based on a sliding scale and provide the Danes with a steady income as they reach old age, with the strength of the safety net built into the system helping ensure that beneficiaries do not feel left out. The top income tax rate is also relatively low compared to other European countries, which has further strengthened the hand of the Danes in terms of receiving the highest level of income transfers. The Danish government is committed to maintaining a high level of taxation because of the large amount of surplus cash that it collects from the tax revenues. As well as a stable economy, the Danes enjoy a low level of trade barriers with neighboring countries, allowing them to have access to advanced technology at low cost.
Growth and development indicators have continued to strengthen in the last few years, with the unemployment rate continuing to fall and real estate values continuing to rise. The Danish government has an ambitious plan for economic recovery, which it claims will result in a return to GDP growth of more than three percent in the medium to long term. Denmark currently has one of the highest levels of debt per capita in the world, but the government debt is expected to reduce as the economy begins to strengthen. With this growth and development potential of the Danish economy will continue to perform strongly, enabling it to eliminate debt at a fast rate.