Denmark 2019

Description

Living standards and wellbeing are high in Denmark. Economic conditions have improved in recent years and the steady expansion is projected to continue. A prolonged series of pension and benefit reforms has delivered sound public finances and strengthened potential growth, among others by indexation of statutory retirement ages to life expectancy. Improving public sector efficiency remains a challenge and would benefit from further digitalisation and reform of collective bargaining. Danish firms are close to the technological frontier thanks to digitalisation and favourable business framework conditions. Nonetheless, productivity growth has been disappointing in the recent past with a particular weakness in less knowledge-intensive service industries. Boosting productivity growth is essential to ensure that living standards and wellbeing remain high. This requires further improving business framework conditions, notably competition pressures. Policy needs to embrace innovative technologies by leaning against attempts to discourage or exclude them and by tackling unintended or outmoded obstacles in legislation and regulation. Reducing high marginal taxes, broadening innovation activity and attracting more high-skilled foreign workers are also priorities. SPECIAL FEATURES: PRODUCTIVITY; BUSINESS FRAMEWORK CONDITIONS Basic statistics of Denmark Executive Summary Key Policy Insights The economy is growing, though modestly The outlook is for continued growth and a tighter labour market A hard Brexit would hit some sectors hard Macro-financial vulnerabilities have declined, but weaknesses remain The housing market would benefit from tax reform and deregulation Macroeconomic policies are stimulating the economy The Budget Law has been effective, but could be refined Higher public sector efficiency could add to fiscal sustainability Linking retirement ages to life expectancy underpins fiscal sustainability Getting pension savings right for all remains a challenge Barriers to foster public sector innovation persist Ensuring equal opportunities to benefit from technological changes Labour market policies need to adapt to the future of work Inclusiveness is high, but active labour market policies are costly Balancing work incentives and redistribution from taxes and transfers Integration of refugees and migrants can be improved Gender gaps are closing, but challenges remain The transition to a low-emission economy could be more cost-efficient References Annex 1.A. Progress in structural reform Annex 1.B. Incorporating downturn risk in fan charts for GDP growth projections Part. Thematic Chapter Chapter 1. Adapting business framework conditions to deal with disruptive technologies Challenges and opportunities for Denmark’s business sector Productivity growth lags behind in less knowledge-intensive services Weak growth in services even at the productivity frontier Key challenges for reviving productivity growth through new technologies Refining competition and regulatory frameworks to promote business dynamics Few young firms grow large, but business dynamics has remained high Promoting competition and reducing regulatory barriers Promoting competition and flexible markets through the regulatory framework Upgrading capital markets and rebalancing taxation to boost investment Investment is shifting towards intangibles Upgrading firm financing to the knowledge economy Rebalancing taxation to foster investment and entrepreneurship Fostering knowledge creation and R&D to boost business innovation Strong innovation leaders mask weaknesses Business R&D and innovation are highly concentrated Improving instruments to foster innovation within firms Improving cooperation between universities and the business sector Enabling businesses to thrive in the digital age Boosting digital adoption in firms to spur productivity growth Fostering high-quality digital infrastructure Favouring superior digitalisation of the public sector and open government data Favouring trust in the new digital economy Building skills to keep up with technological disruption Skills for the future Ensuring effective upskilling and lifelong learning Easing access to skilled foreign workers References