Denmark: Economy rebounds notably in Q3
November 13, 2020
GDP rebounded 4.9% in the third quarter in seasonally-adjusted quarter-on-quarter terms (Q2: -6.8% s.a qoq), according to a preliminary release. The result marked the strongest quarterly growth rate on record; however, the economy only regained some ground after suffering a record contraction in the second quarter. Moreover, activity performed below the average for the Euro area (Q3: +12.6% s.a qoq), but it also performed well above average in the second quarter, when the Euro area contracted 11.8% s.a qoq.
The reading largely reflects the further easing of restrictions. Employment levels improved (Q3: +2.3% s.a qoq; Q2: -3.3% s.a qoq), which likely helped to strengthen domestic demand. The expansion seems to have been broad-based, although trade, transport and business services likely made an important contribution to overall growth. Meanwhile, hotels and restaurants, and culture and leisure—some of the most badly affected sectors in the second quarter—expanded notably as international travel resumed.
Commenting on the economic outlook, analysts at Danske Bank noted:
“As expected, the significant economic downturn triggered by the lockdown in March and April was replaced by rapid growth as most of the economy reopened. […]. However, the shift up in gear has not brought a complete recovery and we expect the upswing to progress at a significantly slower pace, with setbacks along the way. COVID-19 remains a reality in both Denmark and its export markets and restrictions are set to remain in place for some time to come, while we cannot rule out further restrictions and negative reactions from consumers and companies. In our view, we are now in a position more akin to an ordinary recession. Activity is suppressed not only by bans and fear of the coronavirus but also by a lack of demand from corporate investments, for example, which takes longer to restore than it takes to reopen an economy from lockdown.”
Author: Marta Casanovas , Junior Economist