Denmark: Danish economy smashes expectations to become top European performer in Q4
According to a preliminary estimate, the Danish economy gained steam in the final three months of 2023, as GDP growth accelerated to 2.0% in seasonally adjusted quarter-on-quarter terms. The upturn came in above Q3’s upwardly revised 0.4% increase and was the strongest since Q2 2021.
Similarly, year-on-year GDP growth rose 3.1% in Q4 (Q3: +0.7% yoy), the strongest print since Q2 2022. Both results were the best in the Euro area and smashed market expectations. As such, overall GDP growth in 2023 stood at 1.8% (2022: +2.7%).
Denmark’s stellar performance for both the quarter and the year was largely due to skyrocketing demand in the pharmaceutical sector for its famous weight-loss drugs, which drove up production and investment in the sector.
From an expenditure point of view, the improvement was broad-based. Domestically, private consumption growth accelerated to a seasonally adjusted quarter-on-quarter 1.6% (Q3: +0.3% s.a. qoq)—the strongest since Q3 2021—due to increased vehicle purchases. Moreover, government spending rebounded in the quarter to 0.3% (Q3: -0.4% s.a. qoq). Less positively, fixed investment fell by 6.3% (Q3: +3.3% s.a. qoq). The downturn reflected a high base of comparison and falling investment in transport and intellectual rights.
Turning to the external sector, exports of goods and services growth picked up to 5.7% (Q3: +4.9% s.a. qoq). Conversely, growth in imports of goods and services waned to 1.1%, decelerating from the prior quarter’s 6.8% rise.
There are serious downside risks to the upbeat Q4 data. The overall 2023 GDP result would have been a 0.1% contraction, instead of a 1.8% increase, were it not for the pharmaceutical industry’s contribution. These are signs that pharma is be distorting the real state of the Danish economy, and if the industry were to suffer a setback, it would have a significant negative effect on overall growth.
Going forward, a high base of comparison will likely lead to slower growth in Q1. A second national accounts data release for Q4 will be published on 27 March.