GDP growth for Denmark downgraded as winter recession looms large

We now expect Denmark to enter a shallow recession in Q3 this year, ending in Q1 2023, due to rising energy costs, exhausted reopening tailwinds, and tightening financial conditions. We have cut our GDP growth forecasts by 1.2ppts to 2.3% in 2022 and by 0.7ppts to 0.5% in 2023. Beyond 2023, it will take several years for GDP to return to our previous baseline.

What you will learn:

• Government subsidies for energy bills will provide some relief for the poorest consumers, while the relative insulation of the Nordic electricity market is preventing even sharper rises in electricity prices.
• Our 2023 inflation forecast has been raised by 1.5ppts to 3.3% as we now expect the gas price to remain higher for longer, with stronger passthrough into core inflation.
• Inflation is likely to peak towards the end of Q3 and average 7.6% in 2022 before coming down slowly in 2023, aided by a cap on private rents, which are normally tied to inflation.