Denmark: Economy contracts in Q1, worse to come in Q2
May 29, 2020
The economy shrank 2.1% in the first quarter in seasonally-adjusted quarter-on-quarter terms (Q4: +0.4% qoq, previously reported: +0.6% qoq) as Covid-19 hit activity. However, the contraction was less marked than the EU average (-3.3% qoq).
On the domestic front, private consumption was down 3.3% (Q4: +1.7% qoq), suppressed by containment measures. Fixed investment edged down 0.1% (Q4: +0.4% qoq), while government consumption fell 1.5% (Q4: +1.4% qoq), likely driven by the shutdown of some public-sector activities—including school closures.
On the external front, exports fell 0.8% (Q4: -0.5% qoq) amid lockdowns abroad, while imports dipped 0.1% (Q4: +0.1% qoq).
Looking ahead, the economic contraction will intensify markedly in Q2 due to lockdown measures. However, success at containing the virus has led the government to ease restrictions in recent weeks, which, coupled with generous fiscal support, should see a recovery in H2. Risks to the outlook are elevated due to uncertainty over the future evolution of the coronavirus outbreak and consumer spending habits as restrictions are lifted.