Economic growth picks up in Q4

Sequential growth rises to a near two-year high: The Danish economy ended 2024 with a spring in its step, with GDP growth accelerating to 1.6% on a seasonally adjusted quarter-on-quarter basis—the highest since Q1 2023—from Q3’s upwardly revised 1.3% increase. On an annual basis, economic activity expanded 4.1% in Q4, picking up from the previous quarter's 3.8% and marking the strongest reading in a year. As a result, economic growth rose to 3.6% overall in 2024 (2023: +2.5%), the best result since 2006, barring 2021’s post-pandemic recovery.

Upturn led by the pharmaceutical sector: The quarterly upturn was due to the pharmaceutical industry, a softer decline in stocks and the external sector. In particular, exports of goods and services growth jumped to 4.1% (Q3: +0.6% qoq s.a.). Meanwhile, imports of goods and services rebounded 0.7% in Q4 (Q3: -0.3% qoq s.a.). Dynamics on the domestic front were mixed. On the one hand, private spending growth tripled to 0.5% in Q4 from Q3’s 0.2% reading, as sturdy real wage growth likely bolstered household purchasing power. In addition, public expenditure growth sped up to 1.6% in the fourth quarter (Q3: +0.8% qoq s.a.). On the other hand, fixed investment swung into a 0.8% contraction at the tail end of 2024, deteriorating from Q3’s 2.7% rise.

Economic growth to remain above pre-Covid-19 trend in 2025: Our panel expects the economy to be losing steam at the outset of 2025, with sequential GDP growth roughly halving from Q4. Still, domestic demand should be benefiting from lower inflation and the Central Bank’s ongoing monetary policy loosening cycle. Sequential growth should then broadly stabilize around Q1’s rate; as a result, our Consensus is for the Danish economy to expand at a softer clip overall in 2025 compared to 2024 but still outpace the pre-pandemic 10-year average of 1.7%. That said, the performance of the external sector and, more broadly, the Danish economy remains disproportionately exposed to fluctuations in the pharmaceutical industry. Moreover, changes in U.S. trade policy under President Trump are key to track, as are relations between the two countries.

Panelist insight: SEB’s Elizabeth Mathiesen commented: “A slow recovery in consumer spending is likely to delay the expected domestic demand upswing, but we still expect a combination of rising real wages, employment and home prices to deliver a spending surge. […] Trade policy is a key risk after the US has expressed an interest in Greenland, but we do not expect this risk to materialise.”

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