Fra Handelsbanken:
Temporary factors dampened GDP growth last year and the labour market paints a stronger picture of underlying economic activity. Consumers will, in our view, keep the economy going for a while, but lack of skilled labour and weaker global growth are creating headwinds and we believe that the Danish economy will cool down as we move into 2020.
Cracks are appearing in the more expensive parts of the housing market and residential investments are believed to have peaked. Nationalbanken will likely hike rates over the coming year.
Temporary factors lowered growth in 2018
The latest revised National Accounts figures showed stronger-than-expected quarterly growth in the third quarter and growth in the first half of the year was revised up. We have nonetheless only lifted our GDP growth forecast for 2018 slightly to 0.9 percent – the
slowest growth since the European debt crisis in 2012.
The weak outcome is however primarily due to temporary factors, not least the carryover effect from the lift in GDP growth in 2017 from a one-off patent sale. The dry summer also appears to have dampened growth via weakness in utility and agriculture production. Adjusting for those effects points to an underlying GDP growth closer to 1.6 percent.
But peak in growth is behind us.
As theses temporary effects abate, growth will be higher in 2019 than last year, we believe. In the short run we expect export growth to recover somewhat from a surprisingly weak development last year and conditions for private consumption continue to look favourable. High household debt and cautious consumers, as mirrored in a decline in consumer confidence, will however keep a lid on consumption growth, we believe.
Lack of skilled labour also weigh on the growth potential. Furthermore, even though
we expect exports to contribute more to growth this year than last, the ongoing slowdown in the eurozone will reduce foreign demand as we move through the year. Elevated capacity utilisation rates and low interest rates constitute a positive backbone for investments, but high global geopolitical uncertainty and fading global growth prospects will, in our
view, make businesses less inclined to invest.
The upshot is that we have lowered our growth forecast for 2019 to 1.5 percent, largely due to our more pessimistic outlook for especially the eurozone economy. Given the close trade relations with the UK and the relative importance of the shipping sector, a no-deal Brexit remains a key risk for the economic outlook. 2019 is also an election year in Denmark, but we do not foresee any marked changes in the current broadly neutral fiscal stance and stability-orientated economic policy regardless of the outcome.
