GDP records sharpest contraction since Q4 2022 in Q1

The economy shrinks sequentially in Q1: Seasonally adjusted GDP dropped 0.5% quarter on quarter in the first quarter of 2025, down from the 1.6% expansion seen in Q4 2024 and marking the weakest result in over two years. On an annual basis, economic growth slowed markedly to 3.6% in Q1 from the previous period's 4.2%, the softest pace in a year.

Broad-based weakness drives contraction: The sequential downturn was broad-based, with private consumption, public spending, fixed investment and exports all weakening. Domestically, private consumption growth slowed to 0.2% in Q1 (Q4 2024: +0.5% qoq s.a.), while fixed investment contracted 6.3% in Q1 (Q4 2024: +10.2% qoq s.a.)—the steepest fall since Q4 2023. Government consumption also dropped at the sharpest pace since the end of 2023, contracting 1.1% (Q4 2024: +1.5% qoq s.a.). On the external front, exports of goods and services shrank 3.0% in Q1, the weakest result since Q2 2020, and down from 3.6% seasonally adjusted quarter-on-quarter growth in Q4. In addition, imports of goods and services fell by 0.3% in Q1 (Q4 2024: +3.8% qoq s.a.).

Ongoing tariff and drug price talks threaten 2025 outlook: Our panel sees the economy recovering from Q1’s contraction in the coming quarters. However, annual economic growth in 2025 should come in below 2024 levels, as export growth softens. The slowdown stems from a contracting industrial sector, likely linked to evolving policies on tariffs and pharmaceutical costs in the U.S.—a primary market for Danish pharma. That said, Denmark will likely remain the Nordic’s best-performing economy for a second year running in 2025, on relatively stronger fixed investment. An EU–U.S. trade war is a key downside risk.

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