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1 April 2020

The boom in the Danish economy has come to an abrupt end in early 2020. The outbreak of the coronavirus and the measures implemented to contain its spread have led to a sharp contraction in economic activity. Danes have also changed their behaviour by reducing social contact and generally spending less, which has a negative impact on the economy.

Prior to the outbreak of the coronavirus, the Danish economy was robust, which provides a good starting point for addressing the economic fallout.

In an analysis, Danmarks Nationalbank has listed three scenarios, illustrating how severely the Danish economic activity may be affected. These scenarios are subject to exceptionally high uncertainty. Danmarks Nationalbank estimates that growth for the full year of 2020 will be negative by between -3 and -10 per cent.

"In Denmark, our starting point for getting the economy back on track when the outbreak subsides and the measures are rolled back is strong. But it is going to hurt, before we get there. The rescue packages adopted by the Folketing (Danish parliament) are helping to buoy up firms and employees," says Governor Lars Rohde, Danmarks Nationalbank.

"We should not forget that we are also highly dependent on developments abroad. And once the economic restrictions are phased out, more conventional fiscal stimulus will probably be required to underpin demand," says Lars Rohde.

The Governor points out that a number of other countries have a less favourable starting point than Denmark. Less fiscal room for manoeuvre, less well-cushioned households and firms make it harder for a number of countries to underpin demand. Moreover, some countries are hit harder by the virus outbreak. Consequently, the recovery in foreign demand is likely to be considerably slower than in Denmark.

Danmarks Nationalbank supports the economic support measures adopted by the Danish government and the Folketing so far. These initiatives can temporarily buoy up employment and firms. Moreover, central banks around the world have also responded. In Denmark, Danmarks Nationalbank has increased banks' access to liquidity and set up swap agreements to ensure access to currency.

Enquiries can be directed to Press Officer Ole Mikkelsen on tel. +45 3363 6027.