COMMISSION STAFF WORKING DOCUMENT Country Report Denmark 2019 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2019 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011
Date: 2019-02-27
Institutions: European Commission, Secretariat-General
Subjects: Denmark, economic situation, education, investment, labour market, macroeconomics, public finance, social policy, structural adjustment, tax system

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 27.2.2019  SWD(2019) 1003 final  COMMISSION STAFF WORKING DOCUMENT Country Report Denmark 2019      Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2019 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011 {COM(2019) 150 final}  
 
 
CONTENTS 

Executive summary 

1.  Economic situation and outlook 

2.  Progress with country-specific recommendations 

3.  Reform priorities 

3.1.  Public finances and taxation 

3.2.  Financial sector 

3.3.  Employment, education and social policies 

3.4.   Competitiveness reforms and investment 

Annex A: Overview table 

Annex B: Commission Debt Sustainability Analysis and fiscal risks 

Annex C: Standard tables 

3 

6 

12 

16 

16 

19 

25 

33 

43 

47 

48 

Annex D: Investment guidance on cohesion policy funding 2021-2027 for Denmark 

54 

References 

LIST OF TABLES 

Table 1.1: 

Key economic, financial and social indicators - Denmark 

Table 2.1: 

Assessment of 2018 CSR implementation 

Table 3.2.1: 

Financial soundness indicators 

Table C.1: 

Financial market indicators 

Table C.2: 

Headline Social Scoreboard indicators 

Table C.3: 

Labour market and education indicators 

Table C.4: 

Social inclusion and health indicators 

Table C.5: 

Product market performance and policy indicators 

Table C.6: 

Green growth 

LIST OF GRAPHS 

Graph 1.1:  GDP growth and contributions 

1 

56 

12 

14 

23 

48 

49 

50 

51 

52 

53 

6 

 
 
 
 
 
Graph 1.2: 

Investment 

Graph 1.3: 

Total factor productivity 

Graph 1.4: 

HICP Inflation 

Graph 1.5: 

Terms of trade (goods and services) 

Graph 1.6: 

Real effective exchange rate 

Graph 1.7:  Gross public debt and interest burden, 2017 

Graph 2.1: 

Level of implementation today of 2011-2018 CSRs 

Graph 3.1.1:  Employment developments 

Graph 3.2.1:  Nominal house price developments 

Graph 3.2.2:  New construction per thousand inhabitants (four quarter moving average) 

Graph 3.2.3:  Housing price valuation indicators 

Graph 3.2.4:  Household debt 

Graph 3.2.5:  Household mortgage stock 

Graph 3.2.6:  Debt servicing expenditure, households 

Graph 3.2.7:  Credit growth 

Graph 3.3.1:  Labour market developments 

Graph 3.3.2:  People at risk of poverty or social exclusion by country and regions, sorted by range 

Graph 3.3.3:  PISA score gap in science  between, immigrant and non-immigrant students 

Graph 3.4.1:  Labour costs and wage share 

Graph 3.4.2:  Private sector net lending balance and output gap 

Graph 3.4.3:  Productivity growth 

LIST OF BOXES 

Box 2.1: EU funds help overcome structural challenges and foster development in Denmark 

Box 3.3.1: Monitoring performance in light of the European Pillar of Social Rights 

Box 3.4.1: Investment challenges and reforms in Denmark 

7 

7 

9 

9 

10 

11 

13 

17 

19 

19 

20 

21 

21 

22 

22 

25 

28 

30 

33 

33 

34 

15 

26 

41 

2 

 
 
 
 
 
EXECUTIVE SUMMARY 

The  favourable  economic  environment  has 
helped  reduce  the  current  account  surplus  and 
brought  down  the  level  of  household  debt,  but 
challenges  remain.  Labour  market  and  pension 
reforms have helped bring the number of people in 
employment  to  historically  high  levels.  However, 
companies  are  increasingly  reporting  shortages  of 
skilled  workers,  and  the  government  is  falling 
behind  on  its  2025  targets  to  boost  productivity 
growth and the supply of labour. Although high on 
the  government’s  reform  agenda,  productivity 
growth has been particularly weak in domestically 
oriented  services  sectors.  Savings  surpluses  have 
arisen  in  Denmark,  and  are  reflected  in  its  still 
sizeable  current  account  surpluses.  This  has 
increased  the  value  of  households’  housing  and 
pension  assets.  The  value  of  these  assets  remains 
higher  than  household  debt,  and  policy  measures 
have 
to 
economic  shocks.  However,  the  high  level  of 
household  debt,  combined  with  overvalued 
housing  prices,  make  households  vulnerable  to 
sudden 
the 
economy. (1) 

strengthened  households’ 

rates  or 

resilience 

changes 

interest 

in 

Economic  growth  has  been  solid,  averaging 
1.9 % since 2014. Robust consumer spending and 
a  rebound  in  investment  have  been  the  main 
drivers  of  growth.  The  labour  force  has  increased 
considerably,  supporting  the  prolonged  economic 
upswing. In 2017, the employment rate climbed to 
76.9 %,  surpassing  the  long-term  average,  while 
to  5.7 %. 
the  unemployment 
Consumer  price  inflation  has  been  modest,  and 
weaker  than  in  the  euro  area.  This  is  due  to 
taxation changes, the decline in food prices and the 
more  muted  impact  of  rising  oil  prices  on  Danish 
consumer prices. 

rate  declined 

Investment has risen strongly since reaching its 
trough  in  2010.  The  main  drivers  of  its  growth 
in  construction  and 
have  been 
equipment,  which    were  also  the  two  areas  that 

investment 

(1)  This  report  assesses  Denmark’s  economy  in  light  of  the 
European Commission’s Annual Growth Survey published 
on 21 November 2018. In the survey, the Commission calls 
on  EU  Member  States  to  implement  reforms  to  make  the 
European  economy  more  productive, 
resilient  and 
inclusive.  In  so  doing,  Member  States  should  focus  their 
efforts  on  the  three  elements  of  the  virtuous  triangle  of 
economic  policy  —  delivering  high-quality  investment, 
efforts  on  productivity  growth, 
focusing 
reform 
inclusiveness  and 
institutional  quality  and  ensuring 
macroeconomic stability and sound public finance. 

contracted  the  most  following  the  2008  crisis. 
Investment  by  the  public  sector  remains  high, 
although its share of GDP declined from a peak of 
3.9 % in 2014 to 3.4 % in 2017.  

The  current  account  surplus  has  continued  to 
decline, falling to an estimated 6.1 % of GDP in 
is  on  a 
2018.  The  current  account  surplus 
downward trend due to a pick-up in imports thanks 
to  strong  domestic  demand.  The  net  international 
investment  position  remained  high,  meaning  that 
Denmark’s 
investment 
continues  to  be  worth  more  than  its  overseas 
liabilities.  Income  from  the  investment  abroad, 
combined  with  Danish  companies’  sales  and 
production abroad, continue  to provide significant 
support to the current account balance, amounting 
to around 7 % of GDP in 2018.  

financial 

overseas 

Economic  growth  is  forecast  to  gradually  slow 
down  towards  its  potential  growth  rate  of 
1½ %.  Consumer  spending  is  projected  to  remain 
the  main  driver  of  economic  growth,  while  the 
contribution of the remaining GDP components is 
projected to slowly weaken. Employment is set to 
increase  further,  but  companies  continue  to  report 
labour  shortages,  particularly  for  skilled  workers. 
Wages  are 
than 
productivity, putting pressure on competitiveness.  

to  grow 

forecast 

faster 

Public  finances  are  expected  to  be  broadly 
balanced  in  2018  and  2019,  and  to  show  a 
slightly  larger  surplus  in  2020.  The  general 
government  balance  is  expected  to  have  shown  a 
slight  surplus  of  0.2 %  of  GDP  in  2018.  This  is 
despite the reform of the voluntary early retirement 
scheme,  which  resulted  in  a  reimbursement  of 
0.2 %  of  GDP  to  households  in  the  beginning  of 
the  year.  According  to  the  European  Commission 
2018 autumn forecast, the small surplus in 2018 is 
projected to give way to a slight deficit of 0.1 % of 
GDP in 2019, primarily due to an expected one-off 
repayment  of  0.7 %  of  GDP 
in  excessively 
collected  property  taxes.  The  balance  is  therefore 
projected  to  return  to  positive  territory  in  2020 
with an estimated surplus of 0.6 % of GDP.  

Investment  needs  are  emerging  for  skilled 
workers,  research  and  development,  and 
transport infrastructure. Investment as a share of 
GDP  has  risen  above  the  euro  area  average,  and 
Denmark  has  an 
investment-friendly  business 
environment.  Still,  some  factors  are  weighing  on 

3 

 
 
                                                           
Executive summary 

reduction, reflecting the advanced social protection 
schemes,  a  well-developed  welfare  system  and  a 
strong  social  dialogue.  The  share  of  early  leavers 
from  education  and  training  increased  between 
2016 and 2017, but remains below the EU average. 

Key structural issues analysed in this report, which 
to  particular  challenges  for  Denmark’s 
point 
economy, are the following: 

  Although  housing  price 

inflation 

is 
gradually  slowing  down,  property  prices 
remain  overvalued.  While  housing  price 
increases  have  so  far  been  driven  by  the  main 
urban  areas,  these  increases  are  gradually 
spreading to the remaining parts of the country. 
Strong  residential  construction  activity,  a  new 
property  taxation  system,  and  macroprudential 
measures should reduce housing price inflation.  

  While  the  decline  in  household  debt  lost 
momentum  in  2018,  measures  to  bolster 
households’ resilience are being stepped up. 
Following  several  years  of  debt  reduction  by 
households,  this  process  may  have  come  to  a 
temporary halt in 2018. The debt level remains 
above  what 
is  warranted  by  economic 
fundamentals and represents  a risk to financial 
stability. Danish households are among those in 
the  EU  that  spend  the  most  on  servicing  their 
debt.  The  share  of  variable-interest-rate  and 
interest-only  loans  in  the  overall  mortgage 
stock  remain  high.  As  a  result,  Danish 
households are vulnerable to sudden changes in 
interest 
incomes.  Although 
macroprudential  measures  to  limit  risky  loan 
taking have been implemented, it will take time 
for  the  positive  effects  to  be  visible  in  the 
overall mortgage stock and for the measures to 
effectively reduce overall risks.  

rates 

and 

  Employment  growth  has  been  solid,  but 
challenges  persist.  Employment  has  grown  to 
record-high  levels,  supported  by  pension  and 
labour  market  reforms.  While  these  reforms 
will  continue  to  support  an  expansion  of  the 
labour  force  in  the  coming  years,  companies 
continue  to  report  increasing  shortages  of 
skilled  workers.  A  number  of  recent  labour 
market  and  education  reforms  seek  to  address 
this issue. However, it is still key to reduce the 
dropout  rates  of  students  and  incentivise  them 

investment 

capital  holding  back  investment.  Investment  in 
research  and  innovation  is  concentrated  in  a 
number  of  larger  companies.  This  suggests  it  is 
important  to  broaden  the  innovation  base  to 
include  more  companies  and  to  ensure  innovation 
diffusion. Despite educational spending as a  share 
of  GDP  that  is  among  the  highest  in  the  EU, 
increasing shortages of skilled workers are holding 
back 
in  Denmark.  Prioritising 
investments  in  areas  such  as  vocational  education 
and training, and adult and lifelong learning, is key 
to  sustaining 
is 
projected  to  increase  around  the  larger  cities,  and 
there  is  a  need  to  decarbonise  the  transport  sector 
and  reduce  air  pollution.  Annex  D  identifies  key 
priorities  for  support  by  the  European  Regional 
Development Fund and the European Social Fund 
Plus over 2021-2027 in Denmark, building on the 
analysis  of 
investment  needs  and  challenges 
outlined in this report. 

labour  supply.  Congestion 

Overall,  Denmark  has  made  some  progress  in 
addressing 
country-specific 
the 
recommendations.  

2018 

There  has  been  some  progress  in  the  following 
area:   

  Denmark  has 

implemented  measures 

to 
enhance  competition  in  the  financial  sector.  It 
has  also  continued  to  implement  the  utilities 
strategy,  where  political  agreements  on 
measures in the water and sewage water sector 
were reached in October 2018. 

Regarding progress in reaching the national targets 
under  the  Europe  2020  strategy,  Denmark  has 
made  -  or  is  making  -  good  progress.  This  is  the 
case  for  its  targets  on  employment,  research  and 
development, 
emissions, 
renewable  energy,  early  school  leaving,  tertiary 
education  and  energy  efficiency.  However, 
Denmark  is  not  likely  to  achieve  its  target  of 
reducing the number of people at risk of poverty or 
social exclusion. 

greenhouse 

gas 

Denmark performs well on the indicators of the 
Social  Scoreboard  supporting  the  European 
Pillar  of  Social  Rights.  Despite  a  slight  decline 
from  2016  to  2017,  the  employment  rate  remains 
relatively  high  and  the  long-term  unemployment 
rate is among the lowest in the EU. Social security 
benefits  have  a  relatively  high  impact  on  poverty 

4 

 
 
challenge 

to  choose  vocational  education  and  training. 
Another 
the 
is 
employability  of  vulnerable  groups,  such  as 
those with a migrant background, young people 
and people with disabilities who are less able to 
work.  

increase 

to 

  Supporting  investment  is  key  to  reversing 
declining  productivity  growth.  Productivity 
growth  has been falling for decades. Although 
productivity  growth  is  strong  for  companies 
exposed to international competition, it remains 
sluggish  for  domestically  oriented  services. 
Increasing  productivity  growth  is  essential  to 
ensure future economic prosperity. 

  The  current  account  surplus  remains  high 
and  has  led  to  sizeable  net  foreign  assets. 
High  private  savings,  rather  than  depressed 
investment, have supported the current account 
surplus. Although it has declined since its peak 
of  8.7 %  of  GDP  in  2014,  the  current  account 
surplus is expected to have remained above the 
6 % 
macroeconomic-imbalance-procedure 
threshold  in  2018.  Companies  are  now  saving 
less and investing more. This is consistent with 
the  negative  output  gap. 
the  closing  of 
Households  have 
their  savings, 
reflecting their efforts to reduce debt and policy 
measures 
resilience  of 
increase 
to 
households and banks.    

increased 

the 

largest 

adopted 

a  new 

  Denmark  has  strengthened  its  anti-money-
laundering  framework.  In  2018,  against  the 
large  money-laundering 
background  of  a 
scandal 
financial 
the 
involving 
institution  in  Denmark  and  the  largest  amount 
allegedly  being  laundered  to  date  in  the  EU, 
parliament 
anti-money-
laundering package, encompassing a strategy to 
combat money laundering and terror financing. 
The  strategy  rests  on  eight  pillars,  which 
include  strengthening  cooperation  between 
supervisors,  the  financial  intelligence  unit  and 
other  relevant  stakeholders.  More  staff  were 
hired to combat money laundering in 2018, and 
the  2019  national  budget  allocated  additional 
resources 
the  anti-money-
laundering framework. In November 2018, the 
Financial  Action  Task  Force  upgraded 
Denmark on 10 of its 40 parameters, reflecting 
actions  that  have  been  taken  to  improve  the 

strengthen 

to 

Executive summary 

anti-money-laundering  regulatory  framework 
that  have  been  taken  since  the  release  of  the 
Task Force’s mutual evaluation report in 2017.  

5 

 
 
 
1.  ECONOMIC SITUATION AND OUTLOOK 

and  reducing  their  debt  as  the  legacy  of  the  crisis 
(Hviid  and  Kuchler,  2017).  Had  highly  indebted 
households  displayed  a  consumption  pattern 
similar  to  other  less  indebted  households,  private 
consumption  would  have  been  higher  .  Regarding 
the  composition  of  savings,  Danish  households 
have  significantly  increased  their  pension  assets. 
Their  share  in  households’  total  financial  assets 
rose from 41 % in 2007 to 52 % in 2018, while the 
proportion of cash deposits or shares have declined 
from 35 % to 31 % during the same period. 

strongly 

investment 

Investment  has  rebounded 
since 
reaching  a  trough  in  2010.  Investment  has 
increased  from  18.1 %  of  GDP  in  2010  to  an 
estimated 22.6 % of GDP in 2018,  which is 2 pps 
above  its  long-term  average  or  the  euro  area 
average  (Graph  2).  The  main  drivers  of  growth 
have  been 
in  construction  and 
equipment,  which  contracted  the  most  following 
the  crisis.  Residential  construction  has  been 
supported  by  strong  demand  in  the  main  urban 
areas  and  its  share  of  GDP  has  increased  from 
3.7 % in 2010 to an estimated 5.1 % in 2018. Other 
construction  has  increased  from  4.1 %  of  GDP  to 
an  estimated  5.4 %  of  GDP  during  the  same 
period,  driven  by  investment  by  publicly  owned 
companies.  Machinery  and  equipment  investment 
rebounded  from  5.2 %  of  GDP  to  6.8 %  of  GDP 
during the same period. However, a large shipping 
investment  accounting  for  almost  0.8 %  of  GDP 
pushed  up  machinery  and  equipment  investment 
growth  in  2018.  Without  this  large  shipping 
investment,  machinery  and  equipment  investment 
growth would have stagnated around 6 % of GDP 
since  2013,  well  below  the  pre-crisis  average  of 
increased 
7.5 %  of  GDP.  Public 
markedly  following  the  crisis,  growing  from 
around 3 % of GDP to 3.9 % of GDP in 2014. As 
the economic cycle matured, its share decreased to 
3.4 %  of  GDP  in  2017,  which  is  still  higher  than 
the pre-crisis average of 2.9 % of GDP. 

investment 

GDP growth  

Despite  volatile  underlying  figures,  Denmark’s 
economy is on a solid upswing. Economic growth 
gradually  accelerated  from  0.2  % in  2012,  and 
peaked  at  2.4 %  in  2016.  Real  GDP  growth  is 
estimated at 0.8 % in 2018 and forecast to increase 
to 1.6 % in 2019 and 1.3 % in 2020 (Graph 1.1). A 
relatively sharp slowdown in 2018 was mainly of a 
technical  nature. A large payment for the use of a 
Danish patent (recorded as a service export) lifted 
real GDP growth by 0.4 percentage points (pps) in 
2017,  but  caused  a  similar  slowdown  in  2018. 
Danish  real  GDP  growth  has  gradually  been 
slowing  down  since 
in  2016  and 
its  potential  growth  rate 
converging 
around  1½ %.  The  output  gap  is  set  to  remain 
slightly negative in 2019 and 2020. 

its  peak 

towards 

Graph 1.1:  GDP growth and contributions 

Source: European Commission 2019 winter forecast 

Household  consumption  and  investment  have 
been  the  main  drivers  of  growth.  Household 
consumption has contributed  to almost  half of the 
economic  growth  since  2012,  supported  by  the 
incomes.  However, 
steady  rise  of  disposable 
household  consumption  has 
fully 
recovered from the crisis 10 years ago. Household 
consumption, as a share of disposable income, has 
been  decreasing  since  2012,  as  heavily  indebted 
households appear to focus on building up savings 

still  not 

6 

 
 
 
2. Progress with country-specific recommendations 

have been mixed, with solid productivity growth in 
manufacturing,  and  much  weaker  trends  in  the 
services  sector.  Domestically  oriented  services 
sectors (3)  have  shown  particularly  sluggish 
productivity  performance,  while  the  production 
and  sales  of  Danish  companies  operating  abroad 
have  boosted  productivity  growth  (Section  3.4.1). 
A  stagnating  share  of  machinery  and  equipment 
investment  in  GDP  could  nevertheless  suggest 
limited potential to further increase manufacturing 
productivity  growth.  Overall  productivity  growth 
slightly  declined  in  2018  due  to  the  temporary 
slowdown of GDP growth last year. 

Graph 1.3: 

Total factor productivity 

(*) Commission estimate 
Source: Ameco  

Weak  productivity  growth  continues  to  weigh 
on  potential  growth.  Having  bottomed  out  at 
0.8 % in 2013, potential GDP growth is estimated 
to  have  increased  to  1.6 %  in  2018.  The  increase 
was  driven  by  rising  employment  and  investment 
contributions,  while  the  contribution  from  total 
factor  productivity  decreased.  The  contribution 
from labour is forecast to stop growing. Weak total 
factor  productivity  growth  is  not  expected  to  be 
able to provide an additional boost to the potential 
growth rate,  which is thus expected to stagnate  in 
the coming years.  

(3)  I.e.  sectors  in  which  exports  amount  to  less  than  25 %  of 
total value added, or less than 25 % of total value added are 
produced by foreign-owned companies. 

Graph 1.2: 

Investment 

(*) Commission estimate 
Source: Eurostat 

Household  consumption  is  forecast  to  remain 
the  main  driver  of  economic  growth,  while  the 
contributions  of  other  GDP  components  are 
projected  to  weaken.  A  number  of  fiscal 
measures (2)  are  expected  to  boost  household 
incomes  in  the  coming  years,  supporting  robust 
private  consumption  in  the  future.  Rising  house 
prices are forecast to maintain some of the impetus 
for  investment  in  housing,  but  as  the  number  of 
housing  permits  has  been  declining  continuously 
since  their  peak  in  the  fourth  quarter  of  2016, 
growth in housing investment is set to slow down 
from  the  second  half  of  2018  (see  Section  3.2). 
The outlook for exports and equipment investment 
is projected to deteriorate as growth in Denmark’s 
main  trading  partners  is  expected  to  weaken. 
Trade-related uncertainties could negatively affect 
exports. Imports are set to remain robust due to the 
continuing strong domestic demand.  

Potential growth 

growth 

remained 

Productivity 
sluggish. 
Productivity  growth  was  weak  before  2009  and 
was  badly  hit  by  the  financial  crisis.  Total  factor 
productivity has been developing in line with peer 
economies  since 2010, but  was not able to reduce 
the  accumulated  gap  (Graph  3).  Sectoral  trends 

(2)  Payment  to  households  from  the  reform  of  the  voluntary 
early  retirement  scheme  in  2018  (which  transferred  0.2 % 
of  GDP  to  households)  and  the  repayment  of  excessively 
collected  property  taxes  at  the  end  of  2019  (estimated  at 
0.7 % of GDP). 

7 

18192021222324% of GDPDenmarkEuro area949698100102104106108110Index, 2005 = 100DenmarkEuro areaGermanyNetherlandsSweden 
 
                                                           
 
                                                           
2. Progress with country-specific recommendations 

and  an  increase  in  the  population  experiencing 
severe  material  deprivation.  The  rate  of  AROPE 
for  foreign-born  adults  is  above  the  EU  average 
and more than double the rate of the native born. 

income 

inequality  remains 

While 
low,  the 
distribution of net wealth and opportunities are 
becoming  more  unequal.  High  market  income 
inequality  is  contained  by  an  effective  tax  and 
transfer  system,  which  reduces  headline  income 
inequality  to  well  below  the  EU  average.(5)  The 
equalised  net  wealth  of  households  above  the 
median  increased  by  9.5 %  from  2014  to  2016, 
whereas  for  those  below  the  median  the  increase 
was  only  7.4 %.  Net  wealth  grew  slowest  for  the 
poorest households (5.4 %). At the same time, the 
percentage  of  children  at  risk  of  poverty  or  social 
exclusion  and  whose  parents  are  low  skilled  has 
nearly doubled since before the crisis, and stood at 
65.7 %  in  2017,  surpassing 
the  EU  average 
(62.9 %).  By  contrast,  at  6.7 %,  the  share  of 
children  of  parents  with  tertiary  education  and  at 
risk  of  poverty  was  well  below  the  EU  average 
(9.0 %).  This  suggests  challenges  in  ensuring 
equality  of  opportunity,  in  particular  for  children 
of migrant families (see Section 3.3). 

Inflation 

Consumer  price  inflation  remains  low.  Despite 
rising  oil  prices,  solid  economic  growth  and  a 
tightening  labour  market,  harmonised  index  of 
consumer prices (HICP) inflation has been modest, 
and  weaker  than  in  the  euro  area  (Graph  1.4). 
HICP  inflation  declined  from  1.1 %  in  2017  to 
0.7 %  in  2018,  while  euro  area  HICP  inflation 
increased  from  1.5 %  to  1.7 %  during  this  period. 
Denmark had the lowest inflation rate in the EU in 
2018  and  showed  the  widest  divergence  with  the 
euro  area  since  1994.  This  significant  gap  is 
mainly due to taxation changes, the decline of food 
prices  and  the  more  muted  impact  of  rising  oil 
prices  in  Danish  consumer  prices.  Base  effects, 
including  a  lagged  increase  in  food  prices,  are 
expected  to  lift  consumer  price  inflation  to  1.2 % 
in 2019, closing the gap with the euro area. Higher 

(5)  In 2017, the richest 20 % of households had income, which 
was 4.1 times greater than the poorest 20 %, a ratio lower 
than  the  EU-28  average,  and  one  which  has  remained 
stable over time. The ratio for market incomes (i.e. before 
taxes  and  transfers)  was  12.3  in  2016,  above  the  EU 
average. 

Employment and social developments 

the 

labour 

trends  have  been 

Employment 
robust. 
Employment  have  rising  every  quarter  since  the 
beginning  of  2013.  Solid  labour  force  expansion 
paved the  way  for the stable  employment  growth. 
While 
force  expanded  strongly, 
employment increased at an even faster pace. As a 
result,  the  employment  rate  climbed  to  76.9 %  in 
2018, surpassing the long-term average and the EU 
average  of  72.1 %.  Compared  to  the  2006-2008 
period, actual and structural employment (4) trends 
now  appear  more  aligned,  thereby  reducing  the 
risk of an abrupt overheating of the labour market. 

Overall  and 
long-term  unemployment  are 
falling.  At  the  same  time,  the  NEET  rate  (i.e. 
people  not  in  education,  employment  or  training) 
has  increased.  The  unemployment  rate  continued 
to  decline  gradually  to  5.0 %  in  2018,  the  lowest 
level since 2008, and it remains well below the EU 
average of 7.0 %. Long-term unemployment stood 
at around 1 % in 2018. Youth unemployment also 
decreased,  but  there  has  been  an  increase  in  the 
NEET  rate  (ages  15-24)  from  5.8 %  in  2016  to 
7.0 %  in  2017,  possibly  linked  to  the  rise  in  the 
rate  of  early  leavers  from  education  and  training 
(ages 18-24) from 7.2 % in 2016 to 8.8 % in 2017. 

of 

for 

Firms  continue  to  report  labour  shortages, 
skilled  workers,  while 
particularly 
employment  rates  remain 
some 
low 
vulnerable groups. Shortages of skilled labour are 
prominent in certain sectors, such as construction, 
information  and  communication  technology  and 
services.  On  the  other  hand,  lower  employment 
rates can be observed for some vulnerable groups, 
such  as  those  with  a  migrant  background,  young 
people  and  people  with  disabilities  who  are  less 
able  to  work.  Improving  the  employment  rates  of 
these  vulnerable  groups  remains  a  key  challenge. 
The  strong  labour  market  provides  a  unique 
opportunity to integrate these groups of people on 
the labour market. 

Poverty  remains  low  in  Denmark,  yet  has  not 
returned  to  pre-crisis  levels.  This  is  mainly  due 
to  a  slight  increase  in  the  at-risk-of-poverty-or-
social-exclusion (AROPE) rate, which rose 0.4 pps 
to  17.2 %  on  the  back  of  rising  financial  poverty 

(4)  Structural  employment  is  the  level  of  employment  with  a 

non-accelerating inflation rate. 

8 

 
                                                           
                                                           
2. Progress with country-specific recommendations 

wage  growth is  set to raise HICP inflation  further 
to 1.7 % in 2020 (European Commission, 2019a).  

Graph 1.5: 

Terms of trade (goods and services) 

Graph 1.4:  HICP Inflation 

(*) Commission estimate 
Source: Ameco 

Source: Eurostat 

External position and competitiveness 

Denmark’s  share  in  world  exports  has  been 
relatively  stable  since  2012.  This  is  in  line  with 
the performance of Sweden or the Netherlands, but 
falls behind Germany’s robust export performance. 
In volume terms, Denmark’s export market shares 
have  underperformed  those  of  its  peer  countries, 
but positive trends in the terms of trade have lifted 
exports 
The  Danish 
pharmaceuticals  industry  in  particular  has  been 
able  to  maintain  a  high  price  level  in  export 
markets,  while  several  peer  countries  have  seen 
much  weaker  terms  of  trade  developments  due  to 
their industrial specialisation profile (Graph 1.5).  

terms. 

value 

in 

in 

the  net 

international 

The  current  account  surplus  decreased  from 
8.7 % of GDP in 2014 to an estimated 6.1 % of 
GDP  in  2018.  This  sharp  decline  was  due  to 
temporary  factors  (European  Commission,  2018d) 
and  solid  domestic  demand.  The  continued  high 
current  account  surpluses  have  supported  an 
increase 
investment 
position  (NIIP)  from  close  to  balance  in  2008  to 
65 %  of  GDP  in  2018.  With  a  current  account 
surplus  of  1.2 %  of  GDP  being  sufficient  to  keep 
the  NIIP  ratio  stable  over  the  next  10  years,  the 
NIIP  ratio  is  likely  to  increase  further  given  the 
projected  sizeable  current  account  surpluses.  The 
high  net  stock  of 
foreign  assets  generates 
significant investment income further boosting the 
current  account  surplus.  A  large  share  of  net 
international  investment  position  is  in  equity 
investment.  However,  components  of  the  net 
international  investment  position  that  may  be 
subject  to  default  or  partly  be  used  as  collateral 
remain  low,  amounting  to  less  than  an  expected 
20 % of GDP in 2018. 

some  mixed 
competitiveness.  Real 

signs  regarding 
There  are 
Denmark’s 
effective 
exchange  rates  based  on  unit  labour  costs  or 
consumer  prices  (HICP)  have  been  developing 
broadly  in  line  with  those  of  Denmark’s  main 
trading partners in the last  five  years (Graph  1.6). 
On  the  other  hand,  wage  growth  has  started  to 
exceed 
2017, 
compensation  per  employee  increased  by  1.7 % 

productivity 

growth. 

In 

9 

-2-1.5-1-0.500.511.52Inflation differential vis-à-vis euro areaAll-items HICP, Denmark (y-o-y % ch.)959799101103105107Index, 2005=100DenmarkGermanyNetherlandsSweden 
 
 
2. Progress with country-specific recommendations 

Denmark, as some Danish banks are still suffering 
from the legacy of the economic crisis and the high 
share  of  agricultural  lending.  Danish  authorities 
to 
introducing  macroprudential  measures 
are 
further  increase  the  resilience  of  the  financial 
sector,  the  latest  of  which  is  the  increase  in  the 
countercyclical  buffer  to  1.0 %  of  risk-weighted 
assets. 

Housing market and private indebtedness 

The housing market is gradually slowing down, 
but  housing  prices  remain  overvalued.  Buoyant 
residential  construction  and  forthcoming  changes 
to  property 
taxation  and  valuation  are  all 
dampening  housing  price  inflation.  Stark  regional 
housing price divergences have started to ease with 
nationwide  trends  being  driven  by  property  price 
increases 
urban 
agglomerations.  Despite  their  slower  increase, 
housing  prices  remain  above  their  underlying 
fundamentals,  entailing  the  risk  of  a  disorderly 
correction  with  negative  effects  on 
the  real 
economy and the financial sector. The risk has also 
been highlighted by the European Systematic Risk 
Board (ESRB, 2016).  

adjacent 

areas 

in 

to 

the  same  period.  While 

Danish  households  have  continued  to  reduce 
their  debt,  but  the  deleveraging  process  may 
have  come  to  a  temporary  halt 
in  2018. 
Household  debt  has  fallen  from  274.5 %  of 
disposable income in 2014 to 255 % in 2017, while 
the debt-to–GDP ratio fell from 131.5 % to 128 % 
during 
to 
households hovered around a 1.5 % in 2018, weak 
nominal  GDP  growth 
indicates  a 
stagnating 
ratio.  Commission 
estimates  indicate  further  deleveraging  is  needed 
as  household  debt  exceeds  levels  consistent  with 
economic  or  prudential  fundamentals  (Section 
3.1).   

indebtedness 

in  2018 

lending 

Danish households remain vulnerable to sudden 
changes  in  interest  rates  and  income  shocks. 
The risks for the real economy are amplified by the 
high  level  of  household  debt.  Danish  households 
have one of the highest debt-servicing ratios in the 
EU,  and  despite  positive  developments,  the  share 
of interest-only, variable interest rate loans, which 
are  the  most  sensitive  to  shocks,  remained  high. 
Half  of  the  mortgage  loans  are  still  interest-only. 
Following  an  interest  rate  or  income  shock,  most 
households would still be able to service their debt, 

while productivity growth was 0.6 %, resulting in a 
1.1 %  increase  in  nominal  unit  labour  costs.  In 
light  of  growing  labour  shortages  in  several 
sectors,  wages  are  expected  to  increase  somewhat 
faster than projected increases in productivity, with 
growth in compensation per employee expected to 
reach 2.5 % in 2019 and 2.8 % in 2020, above the 
euro area average (European Commission, 2018d). 
A continuation of this trend could lead to a loss of 
competitiveness (Section 3.4.1). 

Graph 1.6: 

Real effective exchange rate 

(*) Commission estimate 
Source: European Commission 

Monetary policy 

The  central  bank  deposit  rate  has  been  almost 
constantly  negative  since  2012,  the  longest 
period  among  EU  countries.  Denmark,  the  only 
country in the ERM-II, maintains a central rate of 
DKK 7.46038 
the  euro  with  a  narrow 
fluctuation band of ±2.25 %. Monetary policy rates 
were  kept  stable  in  2018,  with  the  lending  rate  at 
0.05 % and the deposit rate at -0.65 %.  

to 

Financial sector  

has 

bank 

profitability 

The  Danish  banking  sector  is  well  capitalised 
and 
improved. 
Notwithstanding the slight increase in 2018 due to 
weather-related  difficulties 
the  agricultural 
sector, non-performing loans remain low compared 
to  the  euro  area  average.  However,  Nordic  peers 
than 
have 

lower  non-performing 

loan  ratios 

in 

10 

-5-4-3-2-10123450506070809101112131415161718*Rate of change y-o-y (%)Nominal effective exchange ratesRelative HICP (-)Real effective exchange rates, based on HICPReal effective exchange rates, based on unit labour costs 
 
2. Progress with country-specific recommendations 

Despite 
low  gross  public  debt,  Denmark’s 
public interest expenditure is relatively high. At 
36.1 %  of  GDP  in  2017,  Denmark’s  gross  public 
debt  was  well  below  the  EU  average  of  81.6 %. 
Notwithstanding  the  low  level  of  public  debt, 
Denmark  spends  a  relatively  high  proportion  of 
GDP  on  interest  (Graph  1.7).  Denmark’s  implicit 
interest  rate  of  3.0 %  is  significantly  higher  than 
for  neighbouring  countries,  as  well  as  the  EU 
average of 2.4 %. This is notwithstanding the  fact 
that  the  proportion  of  low-yielding  short-maturity 
bonds (11.5 %) in total Danish public debt is larger 
than  that  of  both  Germany  (7.9 %)  and  Finland 
(10.4 %).  The  high 
is 
primarily  due  to  a  high  share  of  high-yield  long-
term bonds issued in 2008.   

interest  rate 

implicit 

Graph 1.7:  Gross public debt and interest burden, 2017 

Source: Eurostat 

but 
such  events  could  markedly  decrease 
consumption  and  investment.  Although  the  latest 
macroprudential  measures  have  been  effective  in 
restricting  the  availability  of  new  risky  mortgage 
loans  (i.e.  high  loan-to-value  and  debt-to-income 
mortgage loans), it will take time until the positive 
effects will be visible in the overall mortgage stock 
and effectively reduce overall risks (Section 3.1). 

Public finances 

The  general  government  account  was  close  to 
balance in 2018. Strong revenue from the pension 
yield  tax  helped  the  budget  to  reach  a  surplus  of 
1.1 % of GDP in 2017, but this revenue was lower 
in 2018, leading to a substantially lower estimated 
budget surplus of 0.2 % of GDP. The continuously 
strong labour market has contributed to an increase 
in  taxes  on  income  and  wealth,  but  weakening 
growth  momentum  is  putting  downward  pressure 
on  corporate  tax  revenue.  The  reform  of  the 
voluntary  early  retirement  scheme 
to  a 
reimbursement  of  DKK 4  billion  (0.2 %  of  GDP) 
to households in early 2018. 

led 

The  headline  position  is  projected  to  remain 
close to balance in 2019, before improving again 
in 2020. The change from a small surplus in 2018 
to  a  slight  deficit  of  0.1 %  of  GDP  in  2019  is 
primarily due to an expected one-off repayment of 
DKK 15.5  billion  (0.7 %  of  GDP)  of  excessively 
collected  property 
to  households  and 
taxes 
companies.  (6)  However,  the  underlying  fiscal 
position is improving. Accordingly, the  balance is 
projected  to  return  to  positive  territory  in  2020  to 
an estimated surplus of 0.6 % of GDP.  

The  structural  balance  is  projected  to  decline 
slightly  to  a  surplus  of  ½ %  of  GDP  in  2018 
before  stabilising  at  a  surplus  of  around  1 %. 
The  expected  fall  in  the  structural  balance  from  a 
surplus of around 1 % of GDP in 2017 to ½ % in 
2018 is largely due to the transfers associated with 
the  reform  of  the  voluntary  early  retirement 
scheme.  The  structural  balance  is  projected  to 
remain  positive  and  stabilise  at  around  1 %  of 
GDP over the forecast horizon.  

(6)  The  one-off  repayment  of 

the  excessively-collected 
property  taxes  has  been  postponed  to  2020  after  the 
publication  of  the  European  Commission  2018  Autumn 
Forecast.  The  deficit numbers  therefore  do  not  reflect  this 
information.  

11 

0.00.51.01.52.02.53.03.50102030405060708090Public interest expenditure (% of GDP, rhs)Implicit interest rate (%, rhs)Public gross debt (% of GDP) 
                                                           
 
 
2. Progress with country-specific recommendations 

Table 1.1: 

Key economic, financial and social indicators - Denmark 

(1) Net international investment position excluding direct investment and portfolio equity shares. 
(2) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU 
foreign-controlled branches. 
(3) The tax-to-GDP indicator includes imputed social contributions and hence differs from the tax-to-GDP indicator used in the 
section on taxation 
Source: Eurostat and ECB as of 31-1-2019, where available; European Commission for forecast figures (Winter forecast 2019 for 
real GDP and HICP, Autumn forecast 2018 otherwise)  

12 

2.  PROGRESS WITH COUNTRY-SPECIFIC RECOMMENDATIONS 

2004-072008-122013-1520162017201820192020Real GDP (y-o-y)2,5-0,41,62,42,30,81,61,3Potential growth (y-o-y)1,40,80,91,41,51,61,61,6Private consumption (y-o-y)3,3-0,31,22,12,1...Public consumption (y-o-y)1,61,61,20,20,7...Gross fixed capital formation (y-o-y)5,8-3,63,87,64,6...Exports of goods and services (y-o-y)6,21,02,83,93,6...Imports of goods and services (y-o-y) 9,50,53,34,23,6...Contribution to GDP growth:Domestic demand (y-o-y)3,2-0,51,62,52,1...Inventories (y-o-y)0,3-0,20,1-0,2-0,1...Net exports (y-o-y)-1,00,3-0,10,10,2...Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0,2-0,10,10,60,60,60,50,5Capital accumulation (y-o-y)0,80,30,30,60,70,90,80,8Total factor productivity (y-o-y)0,50,70,50,30,20,20,30,4Output gap2,4-2,2-2,1-1,0-0,2-0,6-0,4-0,5Unemployment rate4,56,46,66,25,75,24,94,7GDP deflator (y-o-y)2,42,20,80,71,41,11,62,0Harmonised index of consumer prices (HICP, y-o-y)1,52,40,40,01,10,71,21,7Nominal compensation per employee (y-o-y)3,42,61,61,51,72,22,52,8Labour productivity (real, person employed, y-o-y)1,10,60,90,90,6...Unit labour costs (ULC, whole economy, y-o-y)2,32,00,70,61,12,71,82,0Real unit labour costs (y-o-y)0,0-0,2-0,1-0,1-0,31,60,20,0Real effective exchange rate (ULC, y-o-y)1,5-0,80,00,51,42,8-0,90,0Real effective exchange rate (HICP, y-o-y)-0,2-0,7-0,51,10,51,1-1,5-0,5Savings rate of households (net saving as percentage of net disposable income)-2,7-0,11,14,56,2...Private credit flow, consolidated (% of GDP)17,55,3-0,11,3-0,4...Private sector debt, consolidated (% of GDP)192,3224,0213,9208,0200,7...of which household debt, consolidated (% of GDP)116,5136,5130,8127,9126,6...of which non-financial corporate debt, consolidated (% of GDP)74,886,882,679,773,8...Gross non-performing debt (% of total debt instruments and total loans and advances) (2).2,94,33,42,6...Corporations, net lending (+) or net borrowing (-) (% of GDP)3,67,88,46,65,14,04,33,9Corporations, gross operating surplus (% of GDP)22,722,323,924,124,122,422,222,2Households, net lending (+) or net borrowing (-) (% of GDP)-4,8-1,00,21,41,72,02,11,7Deflated house price index (y-o-y)11,1-6,04,24,73,3...Residential investment (% of GDP)6,24,33,94,34,7...Current account balance (% of GDP), balance of payments3,05,28,37,98,06,36,56,3Trade balance (% of GDP), balance of payments4,25,56,86,77,1...Terms of trade of goods and services (y-o-y)0,40,61,00,70,5-0,3-0,20,1Capital account balance (% of GDP)0,10,1-0,20,00,0...Net international investment position (% of GDP)-0,814,538,354,355,6...NIIP excluding non-defaultable instruments (% of GDP) (1)-25,6-18,56,215,518,4...IIP liabilities excluding non-defaultable instruments (% of GDP) (1)139,7163,7167,7169,4160,7...Export performance vs. advanced countries (% change over 5 years)3,2-0,6-9,9-6,9-4,0...Export market share, goods and services (y-o-y)..0,21,6-1,8...Net FDI flows (% of GDP)1,82,11,53,31,6...General government balance (% of GDP)4,3-1,6-0,5-0,11,20,2-0,10,6Structural budget balance (% of GDP)..-1,20,51,30,50,80,8General government gross debt (% of GDP)35,141,442,737,235,532,831,830,1Tax-to-GDP ratio (%) (3)48,246,348,146,846,545,745,745,6Tax rate for a single person earning the average wage (%)41,039,135,836,0....Tax rate for a single person earning 50% of the average wage (%)37,636,031,031,2....forecast 
 
 
 
2. Progress with country-specific recommendations 

Long-term labour supply and the employability 
of  people  at  the  margins  of  the  labour  market 
were  topics  for  the  CSRs  to  Denmark  in  2011-
2014.  Denmark  implemented  a  number  of  labour 
market,  pension  and  social  reforms  in  this  period. 
Measures were also taken to improve the quality of 
the  education  system  and  to  reduce  dropout  rates 
within  vocational  education.  Denmark  made 
enough progress for the recommendations in these 
areas to be dropped in 2015. Since then, the labour 
market performance has continued to significantly 
improve,  and  the  number  of  people  on  social 
assistance benefits has declined. Labour shortages 
are,  however,  increasing  -  particularly  for  skilled 
workers  -  and  there  is  a  continued  need  to 
incentivise students to choose vocational education 
and  training  (VET),  and  to  increase  the  skills  of 
people on the margins of the labour market.  

down-payment 

in 
following  several 

The  2011-2012  recommendation  to  strengthen 
the  stability  of  the  housing  market  and  the 
the  medium-term  was 
financial  sector 
dropped 
from 
initiatives 
Danish  authorities.  Macroprudential  measures  to 
safeguard  financial  stability  have  been  adopted. 
These include the ‘supervisory diamond’ aiming at 
reducing  risky  lending  by  commercial  banks  and 
mortgage  institutions  (to  be  fully  implemented  by 
2019  and  2020,  respectively).  The  introduction  of 
a loan-to-value cap for mortgage loans, and a 5 % 
compulsory 
loan 
applications,  also  aims  to  reduce  risky  mortgage 
the 
lending.  More 
activation  of  the  countercyclical  buffer  in  2018, 
which  will  reach  1.0 %  of  risk-weighted  assets  in 
2019.  Further  macroprudential  measures 
took 
effect  from  1 January  2018  requiring  amortisation 
for  mortgage  loans  with  high  loan-to-income 
values  subject  to  variable  interest  rates.  A  reform 
from  May  2017  will  re-align  property  taxes  with 
actual  property  values  by  2021,  putting  an  end  to 
the  pro-cyclical  property  tax,  which  also  fuelled 
regional  house  price  divergences.  However, 
progress with the new valuation system behind the 
property tax reform has been delayed.  

recent  measures 

include 

new 

for 

Since  2011,  Denmark  has  made  some  progress 
in  addressing  the  recommendations  to  foster 
competition  and  productivity.  The  government 
has  adopted  reforms  in  specific  sectors,  such  as 
retail  and  transport  services;  there  has  therefore 
been  some  progress  in  this  area.  Following  the 
mapping  of  standards  in  2015,  the  modernisation 

of 

all 

94 % 

specific 

recommendations 

Since  the  start  of  the  European  Semester  in 
2011, 
country-specific 
recommendations  addressed  to  Denmark  have 
recorded  at  least  ‘some  progress’.  6 %  of  these 
country 
recorded 
'limited' or 'no progress' (see Graph 2.1).In a multi-
annual  assessment  of  the  implementation  of  the 
country  specific  recommendations  (CSRs)  since 
these  were  first  adopted,  94 %  of  all  CSRs 
addressed to Denmark since 2011 have recorded at 
least  ‘some’  progress.  .  Substantial  progress  and 
full 
in 
implementation  have  been  achieved, 
particular  in  areas  related  to  public  finances,  but 
also in areas related to labour market policies and 
the financial sector.  

Graph 2.1: 

Level of implementation today of 2011-2018 
CSRs 

(1) The overall assessment of the country-specific 
recommendations related to fiscal policy excludes 
compliance with the Stability and Growth Pact.  
(2) The multiannual CSR assessment looks at the 
implementation since 2011 up until the 2019 Country Report. 
Source: European Commission 

Denmark  delivered  a  timely  and  durable 
correction  of  its  excessive  deficit  by  2013,  and 
has  since  made  the  fiscal  framework  more 
robust. Denmark introduced legally binding multi-
annual  expenditure  ceilings  on  all  three  levels  of 
the  public  sector,  applicable  from  2014  onwards. 
The comply-or-explain principle was also added to 
the fiscal framework in 2016, making national law 
compliant  with  the  Fiscal  Compact.  Since  2016, 
Denmark  has  consistently  had  a  more  positive 
structural  balance  than  its  medium-term  objective 
of  -0.5 %  of  GDP.  It  has  also  not  had  a  country-
specific  recommendation  on  fiscal  policy  since 
2016.  

13 

No progress0%Limited progress6%Some progress43%Substantial progress28%Full implementation23% 
 
2. Progress with country-specific recommendations 

Table 2.1: 

Assessment of 2018 CSR implementation 

Source: European Commission. 

in 

increasing  competition 

of  the  law  on  electrical  installations  in  2015,  and 
the  2018  update  of  the  building  regulation  to 
simplify  procedures  there  has  also  been  some 
progress 
the 
construction  sector.  Furthermore,  there  has  been 
some  progress  on 
incentivising  cooperation 
between businesses and universities, by setting up 
specific 
the 
Innovation Fund.  

programmes 

establishing 

and 

in 

were  reached  in  October  2018.  Despite  continued 
efforts  in  implementing  the  utilities  strategy, 
in  2018.  However, 
progress  remains 
substantial progress has been achieved in fostering 
competition 
sector,  where 
measures  have  been  implemented  to  increase 
competition in the mortgage credit market.  

financial 

limited 

the 

in 

the 

2018 

some  progress 

in 
Denmark  has  made 
addressing 
country-specific 
recommendation.  The  2017  country-specific 
recommendation  emphasised  the  need  to  improve 
competition  in  domestically  oriented  sectors  as  a 
whole. While still including this general emphasis 
on  domestically  oriented  sectors,  in  2018  the 
recommendation  was  more  targeted,  focusing  on 
the distribution of utilities and the financial sector. 
On  the  distribution  of  utilities,  Denmark  has 
implemented  measures  detailed  in  its  utilities 
strategy  on  the  distribution  of  electricity,  gas  and 
district  heating.  Political  agreements  on  some 
measures  in  the  water  and  sewage  water  sector 

14 

Denmark  Overall assessment of progress with 2018 CSR: Some progress CSR 1:  Increase competition in domestically oriented services sectors, for instance in the distribution of utilities and in the financial sector.  Denmark has made some progress in addressing CSR 1: In 2018, Denmark has implemented measures to enhance competition in the financial sector. Moreover, Denmark has continued its work with implementing the utilities strategy. Political agreements on measures in the water and sewage water sector were reached in October 2018.    
 
 
 
 
 
 
 
 
 
 
 
2. Progress with country-specific recommendations 

Box 2.1: EU funds help overcome structural challenges and foster development in 
Denmark 

Denmark  is  a  beneficiary  of  European  Structural  and  Investment  Funds  (ESI  Funds),  and  the 
financial  allocation  is  up  to  EUR  1.5  billion  in  the  current  Multiannual  Financial  Framework, 
equivalent  to  around  2 %  of  all  public  investment  per  year  on  average.  As  of  the  end  of  2018,  some 
EUR 968 million (around 63 % of the total) was already allocated to specific projects. In addition, EUR 788 
million  was  allocated  to  specific  projects  on  strategic  transport  networks  through  a  dedicated  EU  funding 
instrument,  the  Connecting  Europe  Facility.  Furthermore,  many  Danish  research  institutions,  innovative 
firms and individual researchers benefited from other EU funding instruments, notably Horizon 2020 which 
provided EUR 889 million.  

In  general,  EU  funding  helps  to  address  policy  challenges  identified  in  the  country-specific 
recommendations.  ESI  Fund  investments  in  Denmark  mostly  aim  to  promote  small  and  medium-sized 
enterprise  development.  EU  funds  have  supported  closer  collaboration  between  businesses  and  research 
institutions.  They  have  also  supported  R&D  investments  in  the  private  sector.  By  the  end  of  2018,  ESI 
Funds  had  supported  more  than  1 100  enterprises  in  building  cooperation  with  research  institutions,  and 
almost 600 enterprises in introducing new products in their markets. Horizon 2020 supported 1 547 research 
projects covering a very broad thematic spectrum from vaccine development to fish farming. 

In Denmark, total financing under the European Fund for Strategic Investments (EFSI) amounts to 
EUR 762  million,  which  is  set  to  trigger  EUR  4.7  billion  euros  in  additional  investments.  Denmark 
ranks relatively low in the EU for the overall volume of approved operations as a percentage of GDP. Under 
the  ‘infrastructure  and  innovation’  window,  17  projects  were  approved  for  financing  by  the  European 
Investment Bank (EIB) with EFSI backing(1), for a total financing of approximately EUR 567 million set to 
trigger EUR 3.9 billion in total investment. Under the small and medium-sized enterprise component, there 
were  six  agreements  approved  with  intermediary  banks  financed  by  the  European  Investment  Fund  (EIF) 
with EFSI backing, with EUR 195 million in total financing set to trigger approximately EUR 717 million in 
investments, benefiting some 1 228 small and medium-sized enterprises and mid-cap companies in Denmark 
improving their access to finance. One example of and company benefiting from an EFSI-backed project in 
Denmark is financing for Bavarian Nordic, a biotech company. The project, which is receiving a financing 
of  EUR 30  million,  funds  the  construction  of  a  fill-and-finish-facility  on  its  existing  production  site, 
allowing 
the  accelerated  deployment  of  advanced  biotechnological  manufacturing  processes  and 
technologies for the production of vaccines.  

https://cohesiondata.ec.europa.eu/countries/DK 

(1)  9 of which are multi-country projects 

15 

 
 
 
 
 
 
 
3.  REFORM PRIORITIES 

3.1.  PUBLIC FINANCES AND TAXATION 

some  of  these  disincentives  to  pension  savings 
persist, recent analyses by the Ministry of Finance 
suggest  that  improvements  have  been  made  in 
some  areas.  According  to  their  study  (Ministry  of 
Finance,  2018),  the  recent  reforms  have  notably 
made  pension  savings  a  more  attractive  option 
later on in working life. Before these reforms were 
made,  pension  savings  late  in  working  life  had 
been  less  advantageous  than  alternatives  outside 
the pension system.  

Additional  measures  are  being  introduced  to 
incentivise  older  workers  to  remain  on  the 
labour  market.  The  2006  and  2011  welfare  and 
pension  reforms  included  measures  to  shorten  the 
voluntary early retirement pension scheme (VERP) 
and to link retirement age to life expectancy. These 
measures  have  been  phased 
in  since  2013. 
Together  with  other  labour  market  reforms,  these 
measures  have  provided  a  significant  boost  to  the 
labour  supply  of  an  estimated  20 000  persons 
annually  (Graph  3.1.1,  and  the  Ministry  for 
Economic  Affairs  and  the  Interior,  2018a).  The 
retirement age will also be raised for the first time 
in 2019. The retirement age will be adjusted every 
five  years  and  can  be  raised  by  one  year  at  most 
every  five  years.  Life  expectancy  is,  however, 
increasing  faster  than  anticipated  in  the  2006  and 
2011 reforms, leading to higher pension costs than 
projected.  The  2019  budget  includes  a  tax-free 
premium  of  EUR  4 000  for  pensioners  that  reach 
the  statutory  retirement  age  from  2019  onwards, 
and that choose to remain in work for an additional 
year.  

Taxation 

Total tax revenue, as a share of GDP, is among 
the  highest  in  the  EU.  Total  tax  revenue  in 
Denmark  represented  45.7 %  of  GDP  in  2017 
compared  to  an  EU  average  of  39.1 %.  This  is 
despite the Danish  share  falling by 0.8 percentage 
points  (pps)  since  2006,  while  the  EU  average 
increased  by  1.2 pps  over  the  same  period.  More 
specifically, taxes on labour represented 23.1 % of 
GDP  in  2017  compared  to  19.4 %  of  GDP  in  the 
EU.  

inactivity 

trap  of  48.4 %  of 

While high effective income tax rates can affect 
incentives  to  work,  some  progress  in  lowering 
them  has been achieved. Second earners  moving 
from inactivity to 67 % of the average wage face a 
substantial 
the 
additional  wage,  largely  due  to  the  tax  system. 
This represents one of the largest inactivity traps in 
the EU, for which the corresponding average value 
is 31.3 %. (7) However, reforms between 2005 and 
2018  to  lower  taxes  on  labour  income  and  to 
reduce social transfers have contributed to halving 
the  amount  of  people  with 
low  economic 
incentives to work (Ministry for Economic Affairs 
and  the  Interior,  2018b).  The  authorities  expect 
this group to shrink further over the coming years.  

Denmark  continues  to  have  one  of  the  highest 
mortgage debt tax biases in the EU. Denmark is 
among the nine countries in the EU with mortgage 
tax relief. This implies a preferential treatment by 
the tax system of debt-financed housing. Gruber et 
al.  (2017)  highlight  how  deductions  for  mortgage 
interest expenditure induces households to increase 
indebtedness.  Some  steps  have  been  taken  to 
reduce  mortgage  interest  deductibility  for  high 
mortgage interest payers between 2012 and 2019.  

Recent  reforms  aim  at  promoting  pension 
savings.  Political  agreements  on  tax  and  pension 
issues were made in June 2017, February 2018 and 
in  the  2019  budget.  These  agreements  aimed  to 
address the issue of high effective tax rates on the 
pension  savings  of  certain  groups;  particularly 
those close to retirement age and with low pension 
savings (see European Commission, 2018b). While 

(7)  European  Commission  Tax  and  Benefits 

Indicators 

Database, based on OECD data. Values are for 2016. 

16 

 
 
                                                           
3.1. Public finances and taxation 

Public debt is expected to have fallen to 33.3 % of 
GDP  in  2018.  Under  the  European  Commission 
baseline  scenario,  government  debt  is  expected  to 
fall to 10.8 % of GDP in 2029 (see Annex B). The 
Danish authorities, however, expect public debt to 
fall less by 2029. This is primarily due to reforms 
in  the  financing  of  housing  and  of  housing 
taxation,  which  will  result  in  a  build-up  of 
government  assets  and  liabilities  (Ministry  of 
Transport,  Building,  and  Housing,  2017).  These 
reforms are expected to reduce the financing costs 
of  housing  and  to  allow  homeowners  to  postpone 
property tax increases.  

Fiscal framework 

that 

institutions 

The Economic Council is being relocated. Since 
2017, the Economic Council (DØRS) has held the 
role  of  national  productivity  board.  The  national 
productivity  boards  are  objective,  neutral  and 
investigate 
independent 
productivity  challenges,  contributing  to  evidence-
based  policy  making  and  boosting  domestic 
ownership of structural reforms. The  Council also 
acts  as  the  fiscal  watchdog.  It  is  being  relocated 
from  Copenhagen  to  Horsens  as  part  of  the 
government’s 
public 
employment  across  the  country.  A  satellite  office 
of six employees will remain in Copenhagen. The 
move  has  resulted  in  a  loss  of  employees.  It  has 
also  resulted  in  the  postponement  of  DØRS’ 
biannual  reports  and  the  annual  report  of  the 
productivity  board.  The  new  Horsens  office 
opened on 2 January 2019. 

diversify 

strategy 

to 

The Economic Council’s latest fiscal projections 
expect the government to comply with national 
fiscal  rules  in  2018.  Using  the  Ministry  of 
Finance’s  own  methodology  for  the  structural 
deficit, The Economic Council (DØRS) projects a 
larger  structural  deficit  than  the  Ministry  of 
Finance’s projection in 2018. This is primarily due 
to  DØRS  using  a  lower  estimate  of  structural 
revenues  from  North  Sea  oil-  and  gas  exploration 
than  the  ministry,  as  well  as  a  different  treatment 
of  tax  arrears.  At  -½ %  of  GDP,  however,  the 
structural deficit remains  within the  boundaries of 
the  deficit  limit  as  mandated  by  national  law. 
DØRS  also  expects  that  the  government  will 
comply with the expenditure ceiling set for 2019 to 
2022. 

Graph 3.1.1:  Employment developments 

Source: National Reform Programme 2018 

Debt sustainability analysis and fiscal risks 

gap 

indicator,  S1, 

Public  finances  appear  stable  with  few  risks. 
The  Commission  evaluates  fiscal  sustainability 
risks through a range of indicators and analyses. (8) 
The short-term analysis is based on the fiscal stress 
indicator S0, which focuses on sustainability risks 
in  the  upcoming  year.  The  medium-term  fiscal 
sustainability 
provides 
information  about  required  adjustments  to  reach 
the 60 % debt criterion over  a period of 15  years, 
also  taking  into  account  the  costs  of  ageing.  The 
long-term  fiscal  sustainability  gap  indicator,  S2, 
shows  the  fiscal  adjustment  required  to  stabilise 
the  debt-to-GDP  ratio  in  the  long  term.  Debt 
sustainability  analysis  (DSA)  deploys  a  rich 
analytical  toolkit  to  identify  fiscal  risks  over  a 
period  of  ten  years.  DSA  outcomes  influence  the 
medium and long-term fiscal sustainability results. 
Both  the  medium  and  long-term  analyses  grant 
insights  into  the  costs  of  ageing  in  the  fields  of 
long-term  care. 
pensions,  health  care  and 
According  to  these  methodologies,  risks  to  fiscal 
sustainability  in  Denmark  appear  low  across  all 
estimated time horizons. 

Different  technical  assumptions  lead  Danish 
authorities  and  the  European  Commission  to 
project different debt trajectories in the future. 

(8)  For an overview of the European Commissionʼs assessment 
of fiscal sustainability risks in the short, medium and long 
term, see European Commission (2019c). 

17 

270027502800285029002950300030500002040608101214161820Thousand personsActual employmentStructural employmentStructural employment excluding reforms 
 
                                                           
 
3.1. Public finances and taxation 

(+400, bringing the total staff number up to about 
680), training current personnel, and improving the 
IT systems and data it relies on.   

Environmental taxation 

The  use  of  alternative  fuels  in  new  passenger 
cars sold in Denmark remains low. The share of 
new  passenger  cars  using  alternative  fuels  peaked 
in 2015 at 2.4 % of sales, and fell sharply after the 
introduction  of  registration  tax  in  2016.  In  2017, 
the share fell to 0.7 %, considerably lower than the 
EU average of 1.5 %. Since the end of 2017, sales 
of cars using alternative fuels, particularly  plug-in 
hybrids (PHEV), have increased, due to changes to 
car  registration  taxes  that  entered  into  force  in 
October 2017. This reform also aimed to promote 
the  sale  of  cars  with  a  better  fuel  economy  and  a 
higher  level  of  traffic  safety,  and  led  to  a  shift  in 
car  sales  towards  heavier  cars  with  larger  motors. 
Consequently,  average  CO2  emissions  from  new 
cars  based  on  fossil  fuels  were  3.4 %  higher  after 
the  tax  reform  than  in  2016-2017  (Statistics 
Denmark, 2018). In October 2018, the government 
presented  its  goal  to  phase  out  the  sale  of  new 
petrol  and  diesel  cars  in  2030  together  with  new 
initiatives  to  promote  the  sales  of  zero-  and  low-
emission vehicles. 

The  tax  system  can  be  used  for  environmental 
purposes.  In  2018,  excise  taxes  on  diesel  were 
32 %  lower  than  the  ones  for  petrol,  despite 
diesel’s higher carbon and energy content.  This is 
one  of  the  largest  gaps  in  the  EU.  The  gap 
incentivises the use of diesel over petrol, and thus 
promotes nitrogen dioxide pollution. Although this 
‘diesel differential’ on average is offset by a fee on 
certain diesel vehicles, the disincentive to drive an 
extra kilometre is less for diesel than for petrol. 

Tax administration 

the  Danish 

The  tax  administration  has  been  extensively 
reformed.  After  years  of  efforts  to  streamline  the 
tax  administration  and  improve  tax  collection,  on 
1 July  2018 
tax  and  customs 
administration  (SKAT)  was  replaced  by  seven 
agencies:  a  tax  agency,  a  customs  agency,  a  debt 
agency,  a  valuation  agency,  a  vehicle  agency,  a 
development  and  simplification  agency,  and  an 
administration  and  service  agency.  As  part  of  the 
reform,  Denmark  has  once  more  increased  the 
budget  of  the  tax  administration.  In  its  2019 
budget,  parliament  increased  the  resources  of  the 
tax  administrations  by  DKK 2.1  billion,  of  which 
DKK 600 million will be invested in upgrading IT 
systems.  This  increase  follows  two  consecutive 
increases  in  the  budget  of  the  tax  and  customs 
administration in 2017 and 2018, by DKK 5 billion 
and  DKK 5.5 billion  respectively.  In  total,  the 
budget of the tax administration has been increased 
by about DKK 13 billion in three years. The main 
goals  of  the  reform  are  to  modernise  the  tax 
administration  and  make 
it  more  efficient. 
Modernisation is particularly needed in the area of 
information technology. Out  of the  almost 200 IT 
systems  still  used by the tax  administration, some 
were  developed  in  the  1960s  and  1970s.  Splitting 
one  tax  administration  into  several  specialised 
in 
agencies  may 
performance. Nevertheless, it remains too early to 
evaluate the effect of the re-organisation.  

improvements 

lead 

to 

Implementation  of  the  reform  to  the  property 
valuation  system  has  continued,  albeit  with 
some  delays.  New  value  assessments  for  around 
1.7 million owner-occupied houses  were expected 
for the second quarter of 2019. Yet on 31 October 
2018, it was announced that the process would be 
delayed  until  2020.  Valuations  are  public,  and 
owners can access the assessment criteria. If need 
be, owners can ask for a rectification. The reforms 
on  property  valuation  and  tax  administration  are 
connected.  As  part  of  the  tax  administration 
reform,  a  new  specialised  agency  has  been  set  up 
for  private  and  commercial  property  valuation. 
This  agency  has  been  tasked  with  delivering  the 
new  property  valuation  system.  Its  key  goal  is  to 
ensure  that  all  homeowners  get  a  new,  fair  and 
transparent  property  assessment.  To  achieve  this 
goal,  the  recently  established  agency  has  been 
focusing in the recent past months on enhancing its 
resources,  including  by  recruiting  additional  staff 

18 

 
3.2.  FINANCIAL SECTOR 

3.2.1.  HOUSING MARKET AND PRIVATE 

INDEBTEDNESS 

Housing market 

The  housing  market  appears  to  be  switching 
into a lower gear. With the exception of a peak in 
the first quarter of 2018, the annual growth rate of 
nominal  housing  price  has  moderated  from  6.3 % 
in  2015  to  3.0 %  in  the  third  quarter  of  2018. 
Nationwide  housing  price 
trends  have  been 
recently  fuelled  by  property  price  increases  in 
areas  adjacent  to  urban  agglomerations.  However, 
increases in these areas have also moderated since 
the second quarter of 2018 (Graph 3.2.1). 

Graph 3.2.1:  Nominal house price developments 

the 

Rapidly increasing residential construction kept 
pace  with  increase  in  housing  prices.  Having 
bottomed out in 2013, residential construction has 
been  growing  at  an  average  annual  rate  of  7.7 % 
since  2014,  increasing  its  share  of  GDP  from 
3.7 % in 2013 to an estimated 5 % in 2018, above 
its  long-term  average  of  4.7 %.  Copenhagen  has 
in  construction 
experienced 
activity. The number of new dwellings per head of 
population  is  still  below  the  level  reached  in  the 
first quarter of 2008 in the country as a whole, but 
they are well above this 2008 level in Copenhagen 
(Graph 3.2.2). As a result, following several years 
of  shortages,  the  housing  stock  increase  now 
appears  to  match  population  growth  in  the  capital 
area,  with  a  dampening  effect  on  housing 
prices. (9)  

largest 

rise 

Graph 3.2.2:  New construction per thousand inhabitants 
(four quarter moving average) 

Source: Statistics Denmark 

It also appears that housing price  pressure  has 
started  to  moderate  in  the  Copenhagen  area. 
Denmark has so far been the EU country  with the 
most  significant  divergence  between  property 
prices in the capital city and the rest of the country 
(European  Commission,  2017b;  and  Gaál,  2017). 
Notwithstanding a surge at the beginning of 2018, 
quarterly real housing price growth for both family 
houses and apartments has been moderating in the 
capital  city.  The  number  of  dwellings  for  sale 
jumped  in  2018,  and  an  increase  can  be  observed 
in the amount of time that dwellings are advertised 
on  the  market  in  Copenhagen.  Besides  high  price 
levels, several additional factors appear to support 
a  broader  geographical  spread  of  housing  price 
growth and lower demand in the capital area. 

Source: Statistics Denmark 

The decline in building permits indicates slower 
construction  growth  in  the  near  future.  The 
number  of  building  permits  has  decreased  21 % 
since  the  fourth  quarter  of  2016.  This  indicates 
weaker housing constructions going forward. New 
dwelling construction has not been targeted only at 
owner-occupiers:  almost  half  of 
the  newly 
constructed  dwellings  in  the  last  five  years  in 
Copenhagen  have  been  for  private  rentals.  Since 
these  new  rental  dwellings  are  not  subject  to  rent 

(9)  The average square metres per person is 40 in Copenhagen, 
and the number of inhabitants is growing by approximately 
10 000  people  per  year.  This  means  that  construction  of 
420 000  square  metres  per  year  is  in  par  with  the 
population increase (Nykredit, 2018). 

19 

0%2%4%6%8%10%12%All DenmarkCopenhagen areaCopenhagen city0.00.51.01.52.02.52008Q12008Q32009Q12009Q32010Q12010Q32011Q12011Q32012Q12012Q32013Q12013Q32014Q12014Q32015Q12015Q32016Q12016Q32017Q12017Q32018Q12018Q3DenmarkCopenhagen 
 
 
 
                                                           
3.2. Financial sector 

Graph 3.2.3:  Housing price valuation indicators 

Source: European Commission 

Household indebtedness 

(Graph 

While households have been reducing their debt 
since the peak in 2009, the deleveraging process 
may have come to a temporary halt in 2018. The 
deleveraging  process  has  been  more  pronounced 
when  household  debt  is  compared  to  disposable 
income.  This  ratio  fell  from  274.5 %  in  2014  to 
255 %  in  2017,  while  debt-to-GDP  fell  only 
modestly from 131.5 % to 128 % during the same 
The 
period 
household-debt-to-financial-assets 
has 
decreased  even  faster,  from  61.7 %  in  2008  to 
41.7 %  in  2017,  which  is  the  lowest  value  since 
2000.  While  lending  to  households  remained 
modest, hovering at a growth rate around 1.5 % in 
2018, weak nominal GDP growth in 2018 indicates 
indebtedness  ratio.  Nevertheless, 
a  stagnating 
strongly  rising  household  disposable  incomes, 
higher nominal GDP growth rates and stable flows 
of  credit  suggest  continuation  of 
the  slow 
deleveraging trends from 2019.         

3.2.4). 

ratio 

control  (as  compared  to  the  rental  dwellings  built 
before 1991 that still comprise still around 80 % of 
the  existing  stock),  these  new  constructions  will 
increase  the  flexibility  of  the  rental  market, 
supporting labour mobility.  

The  new  property  tax  system  could  already  be 
having  an  impact  on  the  housing  market.  The 
new  system  taking  effect  from  2021  will  restore 
the  link  between  property  market  valuations  and 
taxation.  The  updated  valuation  system  will  mean 
that dwellings (particularly apartments) situated in 
urban areas will be subject to higher taxation. The 
anticipated  new  system  may  therefore  already  be 
dampening price increases in the Copenhagen area 
while supporting prices for dwellings outside cities 
(Danmarks Nationalbank, 2017).  

Housing  prices 
in  Copenhagen  have  been 
increasingly  driven  by  foreign  investors.  In 
2011,  almost  no  foreign  investors  were  active  in 
Denmark’s 
residential  property  market.  By 
contrast, foreign capital was responsible for half of 
the  property  purchases 
in  2017,  mainly  by 
investors from Norway, Sweden, Germany and the 
United States. The market appears to have peaked 
in the first quarter of 2018, after which the share of 
foreign  investors  in  property  purchases  started  to 
decline. These trends are in line with those of other 
main  capital  cities,  as  current  global  financial 
conditions  support  similar  changes  in  housing 
prices in advanced economies (Alter et al 2018). 

Despite  the  slower  increases,  housing  prices 
remain  higher  than  predicted  by  underlying 
fundamentals.  The  overall  valuation  gap (10) 
shows a potential overvaluation of around 10 % in 
2017. While  the  price-to-income  and  price-to-rent 
indicators  have  continued  to  increase  above  their 
long-term  average,  prices  have  been  relatively 
stable  compared  to  the  model based  estimations. 
The European Systemic Risk Board has also issued 
a  warning  in  2016  to  Denmark  pointing  at 
medium-term  vulnerabilities in the residential real 
estate  sector  due  to  increasing  housing  prices  and 
high household debt (ESRB, 2016). 

(10)  The  estimated  valuation  gap  is  an  average  of 

the 
affordability gap (price-to-income deviation from its long-
term  average),  the  yield  gap  (price-to-rent  deviation  from 
long-term  average),  and  the  estimated  deviation  from 
equilibrium values from an error-correction model. 

20 

-40-30-20-10010203040509698000204060810121416% deviation from estimated equilibrium price Model-based valuations gapPrice to income vs. hist. avg.Price to rent vs. hist. avg.Overall valuation gap 
                                                           
 
 
 
3.2. Financial sector 

Graph 3.2.4:  Household debt 

rise  of  interest  rates,  have  been  stagnating  at 
around  11 %  of  the  total  mortgage  stock  since 
2013,  higher  than  their  2008  level.  The  share  of 
interest-only loans remained high and rather stable 
hovering  at  around  45 %  of  the  total  mortgage 
stock since 2008 (Graph 3.2.5).  

Graph 3.2.5:  Household mortgage stock 

Source: European Commission 

Commission analyses suggest a need for further 
reductions in household debt. Despite its gradual 
decrease,  Danish  households’  gross  indebtedness 
remains the highest in the EU and well above what 
fundamental  drivers  would 
suggest.  Danish 
households’ gross indebtedness is also  well above 
the level generally associated with higher risks of a 
banking  crisis.  (11)  These  benchmarks  suggest  a 
need  for  further  deleveraging  of  a  magnitude  of 
30 %  to  60 %  of  GDP  in  order  to  limit  potential 
macro-financial  stability  risks.  In  the  aftermath  of 
the  real  estate  crisis  in  2008,  the  financial  sector 
remained resilient. However, the impact on the real 
economy has been significant, causing suppressed 
domestic  demand  even  ten  years  after  the  crisis 
and  a  potentially  altered  household  consumption 
pattern (Section 1).   

Although  there  have  been  positive  changes  to 
the  composition  of  the  mortgage  stock  since 
2014,  the  developments  are  less  favourable 
when compared to pre-crisis levels. The share of 
variable-interest-rate mortgages (with interest rates 
fixed  for  less  than  a  year)  has  reduced  from  its 
peak of 39 % in 2011 to 25 % in 2018, similar to 
the levels in 2008. Interest-only loans with variable 
interest  rates,  which  are  the  most  sensitive  to  the 

(11)  Fundamental-based 

are 

derived 

from 
benchmarks 
regressions  capturing  the  main  determinants  of  credit 
growth and taking into account a given initial stock of debt. 
Prudential  thresholds  represent  the  debt  threshold  beyond 
which  the  probability  of  a  banking  crisis  is  high, 
minimising the probability of missed crisis and that of false 
alerts. See also European Commission (2017a). 

Source: FinanceDenmark  

Danish households remain vulnerable to sudden 
changes  to  interest  rates  and  income  shocks. 
Although  amortisation,  as  a  share  of  GDP,  has 
risen, debt servicing costs as whole have fallen due 
to decreasing interest rate expenditure. That being 
said, debt servicing costs of Danish households are 
still one of the highest in the EU. The interest rate 
sensitivity  of  the  mortgage  stock  on  average  is 
relatively  moderate,  it  is  sizeable  for  highly 
indebted  households.  A  1 percentage  point 
increase  in  interest  rates  would  have  reduced 
households’ total disposable income on average by 
indebted 
0.7 % 
households 
of 
1 percentage point, would have reduced disposable 
income  by  2.7 %  despite  the  impact  of  generous 
mortgage 
(Danmarks 
Nationalbank,  2018a).  With  an  income  shock  of 
this  magnitude,  most  households  would  still  be 
able  to  service  their  debt.  However,  considering 
the  high  debt  servicing  ratio,  such  a  shock  could 
markedly decrease consumption and investments. 

in  2016.  But  for 
interest 

the  most 
rate 

deductibility 

increase 

interest 

an 

21 

17019021023025027029031080901001101201301401500102030405060708091011121314151617% of Gross Disposable Income% of GDP Debt / GDPDebt / gross disposable income (right axis)0%10%20%30%40%50%60%70%80%90%100%0809101112131415161718Fixed without amortisationFixed with amortisationVariable without amortisationVariable with amortisation 
 
                                                           
 
3.2. Financial sector 

(Table  3.2.1). (13)  Banks  have  ample  liquidity  and 
comply  with  the  fully  phased-in  liquid  coverage 
ratio  (LCR)  requirement.  Impairments  have  been 
decreasing, except for the peak in the first quarter 
of 2018, and banks were able to release some loan 
loss  provisions.  This  helped  them  bring  back 
profitability  to  levels  similar  to  those  of  the  most 
profitable  ones  in  the  EU.  The  average  ratio  of 
non-performing  loans  has  fallen  in  recent  years, 
from 5.1 % in 2014 to 2.5 % in the second quarter 
of  2018.  The  non-performing  loans  ratio  for 
corporate  exposures  picked  up  temporarily  and 
increased to 4.9 % in the first quarter of 2018. This 
was  because  some  loans  to  the  agricultural  sector 
became  non-performing  because  of  adverse 
weather  conditions,  but  the  non-performing  loans 
ratio has since fallen to 4.2 %. 

to 

Credit 
is  growing 
the  private  sector 
moderately. Lending to businesses reached 3.9 % 
annual  growth  in  September  2018.  Credit  to 
households  has  been  increasing  steadily  in  recent 
years.  In  September  2018,  mortgage  credit  was 
growing by 1.3 % (Graph 3.2.7).  

Graph 3.2.7:  Credit growth 

Source: Danmarks Nationalbank 

(13)  In  December  2017,  the  Basel  Committee  on  Banking 
Supervision  endorsed  a  package  of  amendments  to  the 
Basel III framework of prudential standards for banks. The 
Basel  agreement  will  have  implications  for  Danish  banks, 
notably as capital requirements for the major banks will be 
influenced  by  the  composition  of  assets  and  determined 
more by standardised approaches.  

Graph 3.2.6:  Debt servicing expenditure, households 

Source: Danmarks Nationalbank 

The  Danish  authorities  have  adopted  several 
increase  the 
macroprudential  measures  to 
resilience  of  households.  In  2016,  the  Financial 
Supervisory  Authority  adopted 
‘seven  best 
practices’  for  mortgage  lending  in  high  growth 
areas. However, these guidelines  had only limited 
impact  on  reducing  new  loans  with  high  debt-to-
income  levels  (Danmarks  Nationalbank  2018b). 
New  and  stricter  macroprudential  measures  were 
put in place at the beginning of 2018. As a result, 
the  share  of  risky  loans (12)  decreased  markedly 
from 12 % in the fourth quarter of 2017 to 6 % in 
the  second  quarter  of  2018  at  national  level.  The 
share  of  risky  loans  has  fallen  the  most  in 
Copenhagen,  declining  from  19 %  to  8 %  during 
the  same  period  (Ministry  of  Industry,  Business 
and  Financial  Affairs,  2018a).  Although  the  latest 
macroprudential  measures  appear  to  be  effective 
for  new  loans,  it  will  take  time  until  the  positive 
effects  will  be  visible  in  the  overall  mortgage 
stock. Therefore high household debt and the high 
share  of  risky  loans  within  the  overall  mortgage 
stock continues to represent a macroeconomic risk. 

3.2.2.  FINANCIAL SECTOR STABILITY 

Denmark’s  banking  sector  is  stable  and  well 
capitalised.  In  the  first  quarter  of  2018,  the 
average  tier-1  capital  adequacy  ratio  was  17.4 % 
and  the  total  capital  adequacy  ratio  was  21.3 % 

(12)  Loans  with  a  loan-to-income  (LTI)  ratio  above  four 
together with a loan-to-value (LTV) ratio above 60 %. 

22 

012345620142015201620172018Q3% of GDPInterest expenditureAmortisation-5.0-4.0-3.0-2.0-1.00.01.02.03.04.05.0Jan-12Jun-12Nov-12Apr-13Sep-13Feb-14Jul-14Dec-14May-15Oct-15Mar-16Aug-16Jan-17Jun-17Nov-17Apr-18Sep-18y-o-y, %Total private Non-financial corporationsHouseholdsMortgage credit 
 
                                                           
 
 
                                                           
 
3.2. Financial sector 

Table 3.2.1: 

Financial soundness indicators 

* ECB aggregated balance sheet: loans excluding to general government and MFI/deposits excluding from general 
government and MFI. **For comparability only annual values are presented 
Source: ECB 

Macroprudential  measures  to  strengthen  the 
financial  system  are  being  phased  in.  The  final 
provisions  to  reduce  excessive  risk-taking  in  the 
financial  sector,  as  envisaged  in  the  ‘supervisory 
diamond’,  were  introduced  in  January  2019  for 
commercial banks. For mortgage credit institutions 
they  will  be  phased  in  in  2020  and  set  limits  for 
loans  with  deferred  amortisation  and  variable 
interest  rates.  The  countercyclical  capital  buffer 
(CCyB)  has  been  activated  and  will  increase  to 
0.5 %  in  March  2019,  and  to  1.0 %  in  September 
2019. 

The  Financial  Supervisory  Authority  has 
introduced  a  general  resolution  principle  for 
systemically  important  banks  (SIFIs).  SIFIs 
must  fulfil  minimum  requirements  for  own  funds 
and  eligible  liabilities  (MREL)  from  1 July  2019. 
The  general  principle  is  that  it  should  be  possible 
to restructure SIFIs and return them to the market 
with  adequate  capitalisation  to  ensure  market 
confidence.  MREL  has  been  determined  based  on 
this  principle  and  therefore  MREL  would  require 
twice  the  solvency  requirements  plus  twice  the 
capital  buffer  requirements.  Instead  of  MREL, 
mortgage  credit institutions  must fulfil a so-called 
debt  buffer  requirement  of  2  per  cent  of  their 
unweighted loans.  

to 

for  access 

Conditions 
finance  remain 
favourable,  although  challenges  persist  for 
system 
smaller  companies.  The  mortgage 
provides  cheap  access  to  finance  for  companies 
with collateral. Access to finance is more difficult 
and costly for companies without collateral, which 
tend  to  be  smaller  and  younger.  The  cost  of 
borrowing  small  amounts  (up  to  EUR 1 million) 
increased  between  2016  and  2017,  making 
Denmark  among  the  worst  performer  for  the 

relative  cost  of  small  loans  in  the  EU  (European 
Commission, 2018d). 

Anti-money laundering  

Preventing  money  laundering  and  terrorism 
financing  has  become  a  priority  for  Denmark. 
On  19 September  2018,  Danske  Bank,  the  largest 
financial  institution  in  Denmark,  published  the 
results  of  an  internal  investigation  admitting  that 
money  laundering could have taken place through 
its  Estonian  branch  between  2007  and  2015.  In 
2015,  Danske  Bank  closed 
its  non-resident 
portfolio  in  Estonia  following  information  from  a 
whistle-blower.  As  a  result  of  the  scandal,  the 
European  Commission  called  on  the  European 
Banking  Authority  to  investigate  any  possible 
breach  or  non-application  of  European  Union  law 
the  Estonian  or  Danish  supervisors  on 
by 
criminal 
2018.  Moreover, 
21 September 
investigations against Danske Bank are ongoing in 
Denmark, Estonia and the US.   

implemented 
The  Danish  authorities  have 
several measures to fight money laundering and 
combat 
financing.  The  Financial 
Action  Task  Force  (FATF) (14)  identified  several 
issues  in  the  Danish  system  combatting  money 
launder  and  terrorism  financing  in  their  report  of 

terrorism 

(14)  The  Financial  Action  Task  Force  was  created  in  1989  by 
the  G7  and  entrusted 
to  set  global  standards  and 
recommendations.  These  standards  and  recommendations 
cover  AML  rules  for  financial  and  other  entities  to  be 
enforced by public authorities. They  also cover the proper 
criminalisation and prosecution of money laundering. 

23 

(%)20112012201320142015201620172018Q2Non-performing debt3.03.93.95.14.03.42.62.5Non-performing loans---5.13.93.32.52.5Non-performing loans NFC---10.27.05.44.24.4Non-performing loans HH---2.92.72.62.22.0Coverage ratio18.143.644.031.135.227.325.432.3Loan to deposit ratio*306.2295.4292.4280.5277.3265.1253.9252.4Tier 1 ratio14.916.717.316.217.618.419.719.2Capital adequacy ratio16.918.719.218.219.820.722.121.7Return on equity**0.62.04.44.76.89.710.8-Return on assets**0.00.10.20.30.40.60.7- 
                                                           
 
 
 
 
 
 
3.2. Financial sector 

2017  (FATF,  2017).  (15)  On  19 September  2018, 
Denmark  adopted  a  new  anti-money-laundering 
package  encompassing  a  national  strategy,  and 
additional measures to fight money laundering and 
combat  terrorism  financing.  The  new  measures 
introduce  significantly  higher  fines  and  aim  at 
establishing  better  coordination  between 
the 
different  national  institutions.  The  measures  also 
aim  to  improve  cross-border  cooperation  and 
provide significant additional staff for the national 
competent  authorities.  The  2019  national  budget 
allocated  additional  resources  to  strengthen  the 
On 
anti-money 
21 November  2018,  Financial  Action  Task  Force 
40 
upgraded  Denmark 
on 
recommendations  because  of 
in 
strengthening  the  framework  to  tackle  money 
laundering  and  terrorist  financing.  The  Danish 
authorities  are  planning  further  efforts  to  enhance 
compliance  by  transposing  in  full  the  4th  Anti-
the  early 
Money  Laundering  Directive  and 
transposition  of  the  5th  Anti-Money  Laundering 
Directive. 

its  progress 

framework. 

laundering 

the 

ten 

of 

(15)  These  included  a  missing  anti-money  laundering  strategy, 
non-coordination  of  related  objectives  and  activities  of 
competent authorities, the need to improve the national risk 
assessment  methodology  in  input  and  scope,  the  lack  of 
comprehensive  statistics  relevant  for  the  effectiveness  of 
the  anti-money  laundering  system,  the  lack  of  sufficient 
human  resources,  and  concerns that suspicious  transaction 
reports  electronically  submitted 
the  goAML 
system are not integrated with other anti-money laundering 
databases. 

through 

24 

 
 
  
 
 
 
 
 
 
 
 
                                                           
3.3.  EMPLOYMENT, EDUCATION AND SOCIAL POLICIES 

3.3.1.  EMPLOYMENT DEVELOPMENTS 

Despite  a  temporary  slowdown  in  economic 
growth  in  2018,  the  Danish  labour  market 
continues to perform well. The employment rate 
remained relatively high at 76.9 % in 2017, above 
the EU average of 72.1 %. Despite a slight decline 
from 2016 to 2017 by 0.5 percentage points (pps), 
Denmark’s Europe 2020 employment rate target of 
80 %  remains  within  reach.  (16)  Nevertheless, 
firms  are  facing  challenges  in  recruiting  certain 
types of workers, while a section of the population 
(such as young people, migrants, homeless people 
and people with disabilities, mental issues or drug-
problems)  remains  on  the  margin  of  the  labour 
market. 

Unemployment continues to decrease, including 
among  the  young  people,  while  the  not  in 
Education,  Employment,  or  Training  (NEET) 
rate for those aged 15-24 increased in 2017. The 
unemployment  rate  has  gradually  declined  to 
5.7 %  in  2017,  the  lowest  level  since  2008  and 
well  below  the  EU  average  of  7.6 %.  Long-term 
unemployment  dropped  to  1.3 %,  among  the 
lowest  in  the  EU,  and  youth  unemployment  fell 
from  12.0 %  to  11.0 %.  At  the  same  time,  the 
NEET  rate  (among  those  aged  15-24)  increased 
from 5.8 % in 2016 to 7.0 % in 2017. The overall 
activity rate declined from 80 % in 2016 to 78.8 % 
in 2017, but remains 5.4 pps above the EU average 
and below the pre-crisis level. The activity rate for 
men  (81.5 %)  remains  above  that  of  women 
(76.1 %). 

labour 

reporting 

shortages 

Firms  continue  to  report  labour  shortages, 
particularly  for  skilled  workers.  The  share  of 
has 
businesses 
gradually  increased  in  recent  years,  rising  to 
13.5 %  in  2017,  but  has  not  yet  reached  its  pre-
crisis 
the 
level.  Shortages  are  stronger 
construction  sector  (24.4 %  in  2017)  but  are  also 
reported  in  services  (13.3 %)  and  the  industrial 
sector (7.6 %). In addition, approximately 60 % of 
the  small  and  medium-sized  enterprises  reported 
recruitment challenges concerning information and 
communication 
skills. 
Although this share has fallen slightly compared to 
2018, the EU average is significantly lower (52 % 
in 2018).  

technology 

specialist 

in 

Despite  the  lack  of  skilled  workers,  the  labour 
force has increased due to significant inflows of 
foreign  workers  and  older  workers  staying 
longer  in  the  labour  market.  Between  2009  and 
2017,  the  employment  rate  of  people  aged  55-64 
increased  by  10.7 pps,  reaching  68.9 %  thanks  to 
reforms  that  have  delayed  the  age  of  retirement 
and  reduced  early  retirement.  The  number  of 
foreign  workers  has  increased  in  recent  years. 
Foreign  workers  accounted  for  9.2 %  of  the  total 
employed  in  July  2018.  From  June  2015  to  July 
2018,  out  of  the  total  increase  in  employment 
nearly half came from foreign workers. 

Graph 3.3.1:  Labour market developments 

Source: Eurostat 

training 

is  significantly  below 

Increasing  the  number  of  graduates  from 
(VET) 
vocational  education  and 
programmes is crucial for ensuring a sufficient 
supply  of  skilled  workers,  but  participation 
rates  remain  low.  In  2018,  around  19.4 %  of 
young  people  started  a  vocational  education  and 
training  programme  directly  after  compulsory 
schooling,  which 
the 
national 2025 target of 30 %. The 2014 vocational 
education  and  training  reform  strengthened  entry 
requirements,  but  did  not  increase  participation 
rates as intended. On the positive side, the dropout 
rate  decreased  from  24.4 %  in  2014  to  18.5 %  in 
2017.  To  respond  to  the  lack  of  apprenticeship 
places,  firms  committed  to  establish  an  additional 
8 000-10 000 places by 2025, as part of a tripartite 
agreement  reached  in  2016.  Since  2016,  around. 
2 100  additional  apprenticeship  places  have  been 
established (Confederation of Danish Employers,  

16 Employment statistics for Denmark present a break in series 

in 2017 and 2016 (Statistics Denmark, 2017) 

25 

8080.58181.58282.5024681012141620012002200320042005200620072008200920102011201220132014201520162017%%Activity rate 20-64 (rhs)Unemployment rate 15-74 (lhs)Long-term unemployment rate 15-74 (lhs)Youth unemployment rate 15-24 (lhs)NEET rate 15-24 (lhs) 
 
                                                           
 
 
3.3. Employment, education and social policies 

Box 3.3.1: Monitoring performance in light of the European Pillar of Social Rights 

The European Pillar of Social Rights is designed as a compass for a renewed process of upward convergence 
towards  better  working  and  living  conditions  in  the  European  Union. (1)  It  sets  out  twenty  essential 
principles  and  rights  in  the  areas  of  equal  opportunities  and  access  to  the  labour  market;  fair  working 
conditions; and social protection and inclusion.  

Denmark  performs  well  on  the  indicators  of  the  Social 
Scoreboard supporting the European Pillar of Social. This is 
reflected 
in  Denmark’s  advanced  welfare  model,  social 
protection system, well-established social dialogue, and focus on 
active  labour-market  policies.  Employment  rates  are  relatively 
high  and  long-term  unemployment  is  among  the  lowest  in  the 
EU. The risk of poverty or social exclusion is low, especially for 
elderly  people,  and  the  impact  of  social  transfers  on  poverty 
reduction  is  high,  which  reflects  an  efficient  redistribution  of 
resources. 

In  spite  of  the  overall  strong  labour  market  performance, 
young  people  appear  to  face  challenges.  The  share  of  early 
leavers  from  education  and  training  (ages  18-24)  has  increased 
from  7.2 %  in 2016  to 8.8 %  in 2017, but  it  remains  below  the 
EU average (10.6 % in 2017). Male students leave school early 
nearly  twice  as  often  as  female  students  (11.3 %  vs  6.2 %).  At 
the same time, the NEET rate (for those aged 15-24) rose from 
5.8 % to 7 % in the same period.  

Despite a relatively weak labour  market integration of non-
EU  born,  the  employment  rate  of  those  who  have  arrived 
recently (within the last five years), is above the EU average 
(58.7 %  vs.  46.4 %  in  2017).  Denmark  has  introduced  a  series 
of policy measures since September 2015, aimed at reducing the number of asylum seekers and improving 
the labour market integration of recently arrived refugees. The labour market measures, which focus on early 
intervention and assessing individuals’ skills, and appear to be working as intended. In particular, the two-
year  ‘basic  integration  education’  (IGU)  programme  for  those  who  have  resided  less  than  five  years  in 
Denmark,  has  shown  positive  results.  The  programme  combines  work  and  education  (Danish  language 
lessons and professional/vocational courses). By October 2018 around 1 600 IGU contracts had been signed, 
but the dropout rates are relatively high (approximately 36 %), which appears to be partly linked to refugees 
entering into ordinary work.  

(1)  The European Pillar of Social Rights was proclaimed on 17 November 2017 by the European Parliament, the Council 
and  the  European  Commission.  https://ec.europa.eu/commission/priorities/deeper-and-fairer-economic-and-monetary-
union/european-pillar-social-rights/european-pillar-social-rights-20-principles_en 

26 

 
 
      
3.3. Employment, education and social policies 

lower than that of native-born people with a native 
background  (76 %).  This  gap,  which  may  be 
related to lower education outcomes, is among the 
largest in the EU and has not improved much over 
the  last  ten  years.  Other  factors  causing  this  gap 
include  early  tracking  in  education  fields  with 
limited  possibilities  for  good  transitions  to  the 
labour  market;  the  lack  of  networks  and  role 
models;  and  limited  access  to  jobs  in  the  public 
sector  (OECD,  2018a  and  OECD,  2015b).  A 
number  of  measures  aim  to  promote  employment 
of young people with a migrant background in the 
public  sector.  These  measures  include  equity 
benchmarking  at  municipal 
target 
regular  monitoring  of  employment 
setting, 
statistics,  and  small  financial 
incentives,  see 
OECD, 2015b). However, there is no evidence that 
such policies have a substantial impact. 

level  (e.g. 

by 

covered 

collective 

In  2016,  the  share  of  self-employed  people  in 
Denmark was 8 %, the lowest in the EU (where 
an  average  of  14 %  are  self-employed).  While 
workers  in  non-standard  forms  of  employment 
generally face higher risks of being excluded from 
social  protection  schemes,  Denmark  is  among 
those  EU  Member  States  paying  particular 
attention  to  the  greater  diversity  in  the  forms  of 
work  (European  Commission  2018d).  The  access 
to 
‘non-standard’  and  atypical  workers 
of 
unemployment insurance depends on whether they 
are 
agreements 
(approximately  80 %  of  all  employees  are).  In 
voluntary 
2017,  Denmark 
unemployment  insurance  scheme  for  the  self-
employed,  aiming  at  improving  coverage  for  new 
and  combined  forms  of  employment.  In  October 
2018  the  approach  was  further  harmonised  such 
‘non-standard’  and  other 
that  self-employed, 
atypical workers will – to a large extent – be given 
equal  status  to  those  in  traditional  employment 
(STAR,  2018).  Among  other  changes, 
the 
individual’s  unemployment 
calculation  of  an 
benefit  no  longer  distinguishes  between  income 
sources.  To  adjust  to  the  new  types  of  work 
arrangements, 
into 
account  all  sources  of  income,  including  income 
earned from self-employment or atypical work. 

the  allowance  now 

established 

takes 

a 

The proportion of the workforce specialising in 
information  and  communication  technology 
(ICT) (4.4 %) has been stable over recent years. 
Around 71 % of the population have at least basic 
digital skills,  which is  well above  the  EU average 

in  November  2018 

2018).  Furthermore, 
the 
government decided to increase investments in the 
vocational  education  and 
training  system  by 
DKK 2.3 billion over the period 2019-2023. Some 
of  this  money  will  be  spent  on  introducing 
compulsory  vocational  education  and  training 
related  subjects  and  exams  in  lower  secondary 
school  and  on  improving  student  counselling 
(Ministry of Education, 2018a). 

While  employment  rates  for  recently  arrived 
(17) non-EU born residents is relatively high, the 
situation of those who have resided in Denmark 
for  longer  remains  a  challenge.  In  2017,  the 
employment  rate  for  all  non-EU  born  residents 
(both  those  recently  arrived  and  those  who  have 
resided in Denmark longer) fell to 61 %, which is 
18 pps below the employment rate of natives. This 
is  one  of  the  widest  gaps  in  the  EU  and  it  has 
worsened  since  2008.  Non-EU  born  women 
experience an even stronger disadvantage, with an 
employment  rate  of  55.1 %  in  2017,  21.1 pps 
below the rate for native women. At the same time, 
people born outside EU represented 18.4 % of the 
unemployed and 17.3 % of the inactive population 
in  2017.  One  reason  for  the  unfavourable  labour 
market situation of this group is the relatively high 
share  of  low-educated  people  within  it  (OECD, 
2018a) (18).  However,  even  when  accounting  for 
differences 
and 
gender (19),  the  labour  market  performance  of 
migrants  remains  worse  than  that  of  natives  (with 
an  adjusted  employment  probability  that  is  6 pps 
lower). (20)  Beyond  employment,  non-EU  born 
migrants also face higher risks of in-work poverty 
and over-qualification. 

education 

levels, 

age 

in 

a  migrant 
persons  with 
Native-born 
background  also  experience  greater  difficulties 
in  labour  market  integration.  Among  native-
born  people  with  two  foreign-born  parents,  the 
employment  rate  stood  at  58 %  in  2016,  18 pps 

(17)  Less than five years. 
(18)  Latest  data  available.  See  OECD-EU  Settling  in  2018, 
forthcoming,  based  on  1/1/2017  Danish  register  data. 
According to Eurostat, the share of non-EU born residents 
(aged 25-54) with a low  level of education was 26.7 % in 
2017  compared  to  19.0 %  for  natives.  However,  it  was 
down from 30.2 % in 2012 (however, there was a break in 
the data series so it is difficult to interpret).   

(19)  OECD  (2014)  IMO.  Note:  literacy  level  as  measured  by 

PIAAC (2012). 

(20)  This  OECD  estimate  was  based  on  PIAAC  and  for  all 

foreign born (not only non-EU born). 

27 

 
                                                           
3.3. Employment, education and social policies 

median  household incomes have remained flat for 
foreign-born residents since 2012. 

Graph 3.3.2:  People at risk of poverty or social exclusion by 

country and regions, sorted by range 

(1) Data not available for every NUTS2 region for every 
country. The table only includes countries where more 2 or 
more regions (NUTS 2) have data on people at risk of 
poverty and social exclusion. 
Source: Eurostat 

Denmark  is  progressing  on  some  of  the  ten 
social  mobility  goals  drawn  up  in  May  2016, 
which  aim  at  strengthening  the  focus  and 
emphasis  of  social  policy.  Some  positive  results 
can be seen in the decline in the crime rates among 
marginalised  young people, and in the  increase in 
the  share  of  adults  who  successfully  complete  an 
alcohol  rehabilitation  programme.  On  the  other 
hand,  the  proportion  of  young  people  completing 
an  upper 
education  programme 
decreased from 2014 to 2016 (Ministry of Children 
and Social Affairs, 2018a).  Overall, the improved 
economic  and  labour  market  situation  has  not 
resulted  in  significant  changes 
to  the  social 
situation.  

secondary 

A proposal from October 2018 aims to increase 
employment among people with disabilities. The 
2025  target  is  for13 000  people  with  a  significant 
disability  to  find  employment,  either  in  ordinary 
work  or  in  ‘flexjobs’  (Ministry  of  Employment, 
2018a).  Funding  of  DKK 120  million  will  be 
distributed  over  four  key  priorities:  reducing 
bureaucracy  and  smoothing 
to 
employment;  targeted  efforts  to  encourage  more 
into  employment; 
people  with  a  disability 
improved  possibilities  for  training;  and  improving 
knowledge  of  disabilities  and  reducing  prejudice. 

transition 

the 

of  57 %.  This  proportion  has,  however,  decreased 
from  78 %  in  2017,  which  is  also  highlighted  in 
the Social Scoreboard accompanying the European 
Pillar  of  Social  Rights.  The  ‘Disruption  Council’, 
established  in  2017  to  adapt  the  labour  market  to 
the  collaborative  economy  and  the  spread  of 
digitisation,  is  expected  to  develop  a  set  of 
recommendations  by  February  2019.  These 
recommendations  will 
for 
digitisation  and  artificial  intelligence  to  improve 
welfare  and  prepare  the  labour  market  for  the 
potential losses of some traditional jobs.  

promote  ways 

3.3.2.  SOCIAL POLICY AND INCLUSION 

Poverty and income inequality remain low. The 
share of the population at risk of poverty or social 
inclusion (AROPE) is relatively low, but it has not 
yet  returned  to  pre-crisis  levels.  In  2017,  the 
AROPE  rate  stood  at  17.2 %,  a  slight  increase  of 
0.4 pps,  due  to  rising  monetary  poverty  and  an 
increase  in  the  population  experiencing  severe 
material  deprivation.  Men  have  a  slightly  higher 
risk  of  poverty  or  social  exclusion  (17.8 %)  than 
women (16.6 %). Graph 3.3.2 shows that regional 
disparities  in  the  AROPE  rate  are  among  the 
lowest in the EU. For people above the age of 65, 
the AROPE rate has decreased in recent years and 
is  almost  half  that  of  the  EU  average  (9.5 %  vs 
18.1 %  in  2017).  In  addition,  the  number  of 
persons  living  in  households  with  very  low  work 
intensity  fell  by  almost  30 000.  However,  the  gap 
between this number and the national Europe 2020 
target is far from being closed. (21) 

The  population  at  risk  of  poverty  or  social 
inclusion rate for foreign-born adults is 38.1 %, 
which  is  more  than  double  the  rate  for  those 
born  in  Denmark  (16.3 %).  It  is  also  above  the 
EU  average  of  35 %.  The  situation  remains 
particularly  unfavourable  for  those  born  outside 
the EU, 42.1 % of whom were at risk of poverty or 
social  exclusion  in  2017,  an  increase  of  10.7 pps 
compared  to  2014.  And  while  median  household 
incomes  for  those  born  in  Denmark  have  been 
increasing steadily since the end of the crisis years, 

(21)  The national Europe 2020 target is to reduce the number of 
persons  in  very  low  work  intensity  households  by  22 000 
by  2020,  based  on  a  reference  point  of  the  2008  value  of 
347 000. 

28 

0102030405060ITESROBGDEATCZSKSEIEFIDK 
                                                           
 
3.3. Employment, education and social policies 

In 2017, approximately one third of people with a 
disability were in employment. 

3.3.3.  INTEGRATION POLICY 

to 

by 

access 

universal 

incentives  appear 

The  adequacy  of  minimum  income  benefits  is 
high,  and  recently 
introduced  changes  to 
require  beneficiaries of welfare benefits to find 
employment appear to be working as intended. 
Benefits for a single person represented 87.1 % of 
the poverty threshold, and 76 % of the income of a 
low wage  earner  in  2016,  one  of  the  highest 
adequacy  levels  in  the  EU. (22)  This  is  also 
supported 
social 
services. (23) Recent initiatives aimed at increasing 
work 
to  have  worked  as 
intended.  The  number  of  social  assistance 
recipients  decreased  by  20 %  between  April  2016 
and September 2018, corresponding to 31 100 full-
time  persons  (seasonally  adjusted)  (Ministry  of 
Employment  2018b).  It  is,  however,  unclear  to 
what  extent  this  positive  trend  is  related  to 
incentives  to  ‘make-work-pay’ (24),  or  rather  is 
reflective  of  increasing  economic  activity  and  job 
creation.  For  unemployment  benefits,  Denmark 
ranks  above  the  EU  average  for  indicators  related 
to  coverage,  adequacy  and  net  replacement  rate. 
The  maximum  duration  of  benefits  for  persons 
with a one-year work record, two years, is among 
the longest in the EU. (25) 

on  Minimum 

(22)  Calculated  using  OECD  and  Eurostat  data  as  part  of  the 
Benchmarking  Framework 
Incomes 
conducted  within  the  SPC  Committee.  The  at-risk-of-
poverty  threshold used here  is  the  one  agreed  upon  at  EU 
level. It is calculated separately for each country and is set 
at  60 %  of  the  median  of  the  total  national  household 
equivalised 
Joint 
Employment Report 2019, COM(2019) 761 final. 

income.  For  details, 

see  draft 

in 

the  smallest 

(23)  In 2017, Denmark had the smallest gap in unmet needs for 
medication examination between working age adults at risk 
of poverty and in very low  work intensity households and 
those not at risk of poverty nor in very low work intensity 
(VLWI)  households  was 
the  EU. 
Additionally, Denmark has one of the lowest gaps between 
these two groups in non-participation in training related to 
professional  activity.  While  the  gap  in  the  housing  cost 
overburden rate is highest in the EU, this may relate to the 
large number of student households and may not accurately 
reflect the position of minimum income beneficiaries.   
(24)  This  includes  the  ceiling  on  social  assistance  benefits 
the 
(2016), 
introduction  of  lower  benefits  (2015)  for  recently  arrived 
refugees. 

the  225-work 

(2016)  and 

requirement 

improving 

incentives  for 

In  recent  years,  a  number  of  policy  initiatives 
aimed  at  discouraging  new  migrants  from 
entering  Denmark  while 
the 
integration  outcomes  for  those  that  did.  These 
changes  include  tightening  the  access  to  social 
benefits  and  the  requirements  for  obtaining  a 
permanent  residence  permit.  Other 
initiatives 
aimed at improving the integration outcomes, such 
as  financial 
language  students 
through  a  compulsory  deposit  (supported  by  a 
bonus,  which  is  however  limited  to  six  months 
since  2018).  There  has  been  a  marked  decline  in 
the  number  of  asylum  claims  as  well  as  family 
migration to Denmark over the last few years. The 
Danish  government  proposed  a  "No-Ghetto"  plan 
based  on  22  initiatives  including  compulsory 
childcare 
vulnerable 
children 
neighbourhoods, Danish language test in preschool 
class  (grade  0)  and  better  allocation  of  children 
with  a  migrant  background  in  secondary  schools 
(Regeringen,  2018).  However  as  the  bill  has  not 
yet  been  adopted,  its  impact  cannot  yet  be 
measured. 

for 

in 

two-year 

(IGU)  programme 

fast-track  Basic  Integration 
The 
Education 
for  recently 
arrived  migrants  and  refugees (26)  is  set  to  be 
prolonged. It was introduced in 2016 as part of a 
tripartite  agreement  and  combines 
language 
classes,  apprenticeships  and  vocational  education 
for recently arrived migrants and refugees between 
18-39 years. Participants receive a wage according 
to  the  sector-specific  collective  agreements  and 
companies 
the 
completion  of  an  IGU  apprenticeship  receive  a 
cash  bonus.  Despite  relatively  high  dropout  rates, 
which  are  partly  due  to  participants  entering  into 
ordinary  work  or  continued  education,  the  IGU 
programme  shows  positive  first-hand  results.  The 
number of participants is increasing and companies 
report  a  high  degree  of  satisfaction  with  the 
scheme.  This  has  resulted  in  a  positive  attitude 
among the social partners in regards to prolonging 
the IGU programme. 

that  recruit  participants  upon 

(25)  According  to  the  benchmarking  exercise  in  the  area  of 
unemployment  benefits  and  active  labour  market  policies 
conducted  within  the  EMCO  Committee.  See  the  draft 
Joint Employment Report 2019 for details. 

(26)  Maximum five years of residence in Denmark. 

29 

 
                                                           
                                                           
3.3. Employment, education and social policies 

measures to improve the quality of early childhood 
education  and  care.  This  will  be  spent  on  support 
of  municipalities 
trained 
pedagogical assistants, continuous training of staff 
and direct support to the  most vulnerable  families 
(Ministry of Children and Social Affairs, 2018b).  

to  employ  more 

The  educational  outcomes  of  pupils  with  a 
migrant  background  remain  a  key  challenge.  
At  the  same  time,  foreign-born  children  show 
relatively  high  participation  in  early  childhood 
education  and  care  compared 
to  other  EU 
countries.  Pupils  at  the  age  of  15  with  a  migrant 
background  are  3.4  times  more  likely  to  under-
achieve  in  science,  compared  to  those  without  a 
migrant  background 
(European  Commission 
2018c). This underachievement remains even after 
accounting  for  the  social  economic  background. 
This  suggests  that  the  performance  gap  between 
foreign-born  children  and  native  born  children  is 
less  significant  for  younger  children,  while  it 
increases  during  primary  and  lower  secondary 
school.  

Graph 3.3.3:  PISA score gap in science  between, 

immigrant and non-immigrant students 

Source: OECD PISA 2015 

In  January  2019,  the  government  reached 
agreement on a reform package, fine-tuning the 
the  primary  and 
lower 
2014  reform  of 
secondary 
It 
system 
school 
increases the number of lessons in subjects such as 
art, history and foreign languages and provides for 
the introduction of more practical subjects, such as 
craftsmanship.  The  reform  package  will  also 
reduce  the  length  of  the  school  day  and  the  share 

(Folkeskolen). 

3.3.4.  EDUCATION 

Despite recent  budget cuts, Denmark continues 
to  be  among  the  EU  countries  with  the  highest 
education  spending  as  a  percentage  of  GDP. 
Education spending amounted to 6.6 % of GDP in 
2017,  a  significant  part  of  which  is  related  to  the 
student  grant  system  at  tertiary  level.    General 
government  expenditure  on  education  remained 
broadly  unchanged  at  DKK 142  billion  (EUR 19 
billion)... Denmark spends 1.3 % of GDP in early 
childhood education and care compared to 2 % in 
Sweden.  

The  Danish  education  system  is  performing 
well,  with  educational  outcomes  above  the  EU 
average,  but  the  early  school-leaving  rate 
increased  to  8.8 %  in  2017.  Boys  tend  to  leave 
school  early  nearly  twice  as  often  compared  to 
girls (11.3 % vs 6.2 %), which is one of the highest 
gender  gaps  for  early  school  leaving  in  the  EU. 
However, the early-school leaving rate of students 
from  a  migrant  and  socially  disadvantaged 
background is a concern, in particular for second-
generation migrants (Greve and Krassel, 2017) (27) 
who  do  not  seem 
(European 
Commission,  2018c).  The  gap  in  the  dropout  rate 
between  foreign-born  and  native-born  children 
amounts  only  to  0.5 pps  (8.8 %  compared  to 
9.3 %), one of the narrowest gaps in the EU.  

to  catch  up 

Participation  in  early  childhood  education  and 
care  is  nearly  universal.  The  system  covers 
almost all children above the age of four (98.1 %), 
but  conditions  vary  between  the  municipalities. 
Further  improving  participation  and  quality  may 
contribute  to  reducing  the  gender  gap  in  school 
the 
dropout  rates,  as  well  as 
educational  outcome  gap  between  young  people 
from a  migrant background and  young people not 
from a migrant background. In a new initiative for 
2019  called  ‘The  first  1 000  days  of  a  child’  the 
government  proposes  to  invest  DKK 1  billion  in 

to  narrowing 

(27)  In  PISA  2015  the  proportion  of  low  achievers  in  science 
was  0.9 pps.  lower  than  in  2012.  However,  this  was  still 
much  higher  in  2015  for  foreign-born  (28.2 %)  than  for 
native  students  (14.8 %).  23.5 %  of  foreign-born  students 
in mathematics and 25.6 % in reading were low achievers, 
in both cases a gap of around 11 pps relative to native-born 
students. This shows a substantial narrowing of the gap in 
mathematics between 2012 and 2015, but little progress in 
reading.  The  mean  performance  in  science  of  migrant 
students  in  2015  trailed  69  points  behind  non-migrant 
students. 

30 

-90-80-70-60-50-40-30-20-100FIDKDESEATBefore accounting for students' socio-economic statusAfter accounting for students' socio-economic status 
                                                           
 
3.3. Employment, education and social policies 

of  insufficiently  qualified  teachers  while  giving 
more autonomy to individual schools. 

and  unemployed  (27.9 %)  people  participating  in 
adult  learning  is  significantly  higher  than  the  EU 
average (4.3 % and 10.1 %, respectively).   

The  share  of  tertiary  graduates  has  increased, 
but the share of science, technology, engineering 
and  mathematics  (STEM)  graduates  remains 
low.  The  tertiary  attainment  rate  increased  to 
48.8 %  in  2017,  but  the  share  of  graduates  in 
engineering and  manufacturing remains below the 
EU average, although it is slightly higher than the 
EU  average  in  information  and  communication 
technology. Female tertiary attainment is 11.8 pps, 
above the EU average, and similar to other Nordic 
countries.  

The  employment  rate  of  tertiary  graduates 
remains  high  (83.8 %),  3.6 pps  above  the  EU 
average. In 2018, the government proposed a new 
strategy for higher education, the main purpose of 
which  was  to  help  students  to  work  during  their 
studies  or  between  a  bachelor’s  and  master’s 
degree.  The  number  of  bachelor’s  degree 
programmes  has  been  reduced  and  their  content 
broadened  to  better  prepare  students  for  the 
demands  of  the  future  labour  market.  Computer 
science  has  been 
in  some  study 
programmes,  and 
the  promotion  of  science, 
technology,  engineering  and  mathematics  related 
in  secondary 
subjects  has  been 
education. 

intensified 

included 

‘natural 

transmission 

‘floriculture  and 

To  meet  future  labour  market  demands,  new 
digital specialisations are provided by technical 
upper  secondary  and  vocational  education  and 
training institutions. These include topics such as 
‘technology and programming’, ‘renewable energy 
sources’, 
and 
gas 
landscape 
distribution’  and 
architecture’.  The  government  has  established  the 
Centre  for  the  Application  of  IT  in  Teaching  in 
Vocational Education. This centre will collect and 
disseminate experience and  knowledge on the  use 
of  IT  and  technology  in  teaching  to  benefit  both 
students  and  teachers.  The  centre  will  work  in 
close  collaboration  with  researchers  from  Danish 
universities  to  ensure  the  creation  of  a  new 
knowledge base in the area of IT in teaching.  

Participation  in  lifelong  learning  (26.8 %  in 
2017)  is  well  above  the  EU  average  (10.9 %). 
Participation  rates  are  significantly  higher  for 
women 
(22.3 %). 
Furthermore,  the  share  of  low-qualified  (17.3 %) 

for  men 

(31.4 %) 

than 

3.3.5.  HEALTH POLICY 

Denmark  has  a  well-performing  health  system, 
and remains among the Member States with the 
highest  spending  on  health  (10.2 %  of  GDP) 
and 
long-term  care  (2.5 %  of  GDP).  Life 
expectancy is around the EU average (80.9 years), 
but there is a significant gender gap of four years. 
Furthermore, the number of healthy years remains 
below the EU average, which appears to be linked 
to  lifestyle  factors (28),  affecting  the  low-educated 
in  particular. (29)  The  vast  majority  of  medical 
cases are handled by general  practitioners  without 
referral  to  further  examination  and  treatment. 
Spending  on  hospital  healthcare  is  relatively  high 
(44 % of healthcare spending).  

for 

hospital 

admissions 

The  self-reported  unmet  need  for  medical  care 
is  relatively  low,  as  highlighted  in  the  Social 
Scoreboard  accompanying  the  European  Pillar 
of  Social  Rights,  but  there  are  some  challenges 
related  to  the  healthcare  workforce.  Around 
70 % of all general practitioners are no longer able 
to  accept  new  patients,  and  this  leads  to  rates  of 
avoidable 
certain 
conditions  (which  can  be  treated  at  the  level  of 
general  practitioners)  that  are  higher  than  the  EU 
average.  A  government  proposal  from  January 
2019  aims  to  increase  the  number  of  general 
practitioners  and  improve  patients’  access  to 
primary  healthcare.  The  relatively  low  share  of 
specialist practitioners and relatively high share of 
doctors  are  also  challenges.  Moreover,  as  the 
population ages, nurses  will  need to take on  more 
chronic disease management and health promotion 
activities.  It  also  appears  to  be  a  challenge  to 
coordinate  between  hospitals  (which  are  managed 
at  the  regional  level)  and  primary  healthcare 
(which  is  organised  by  the  municipalities).  This 
may  result  in  waiting  times  and  uncertainty  for 
patients.  

(28)  Over 30 % of the overall disease burden could be attributed 

to behavioural risk factors, IHME, 2016. 

(29)  Smoking  rates  are  more  than  double  and  obesity  twice  as 
prevalent among people with the lowest level of education. 

31 

 
                                                           
3.3. Employment, education and social policies 

In  January  2019,  the  government  proposed  a 
major  structural  health  reform  based  on  the 
principle  of  proximity,  implying  that  patients 
must  be  treated  closer  to  their  place  of  residence, 
by,  among  other  things,  reducing  the  number  of 
hospital  consultations  by  500 000  and  the  number 
of  hospital  admissions  by  40 000  by  2025.  The 
reform  also  aims  to  re-structure  the  financial 
management of the health system by closing down 
the regional councils. 

Denmark  ranks  as  one  of  the  front-runners  in 
in 
the  deployment  of  e-health.  IT  systems 
hospitals and general practices are well developed. 
There is also good digital communication between 
healthcare  sectors.  A  new  national  strategy  for 
digital health from 2018, the digital health strategy 
2018-2022,  focuses  on  digitisation  and  the  use  of 
health  data  for  prevention  and  care.  The  strategy 
will  complement  the  2013-2020  assisted  living 
strategy. 

for 

are 

to  business 

Continuous investments in skills, education and 
training 
sustaining 
important 
Denmark’s  long-term  inclusive  growth.  Labour 
shortages,  in  particular  of  skilled  workers,  are  a 
key  obstacle 
investment.  This 
underlines 
to  prioritise  continuous 
investment in education and training, in particular 
in vocational education and training (VET), adult- 
and  lifelong  learning.  This  upskilling  concerns 
both  those  in  employment  and  people  who  are 
currently outside the labour market. 

the  need 

32 

 
 
3.4. COMPETITIVENESS REFORMS AND INVESTMENT 

3.4.1.  EXTERNAL POSITION AND 
COMPETITIVENESS 

The  external  position  of  the  Danish  economy 
indicates  strong  competitiveness.  Pressure  on 
competitiveness  indicators  is  building.  Nominal 
wage  growth  has  been  moderate  despite  the 
the  negative  output  gap. 
gradual  closing  of 
Inflation  and  effective  exchange  rates  point  to 
stable  external  price  competitiveness  (see  Section 
1),  but  increasing  globalisation  and  the  low 
inflation 
conventional 
competitiveness  more  difficult  to  interpret.  Over 
the  long-term,  however,  nominal  wage  growth 
should  develop 
inflation  and 
productivity. In Denmark, wages have grown more 
than  inflation  and  productivity  in  the  recent  past. 
This  has  brought  the  wage  share  of  the  private 
sector  back  to  levels  observed  in  the  years  before 
the  crisis  when  imbalances  were  building  up 
(Graph 3.4.1). 

environment  makes 

line  with 

in 

Graph 3.4.1:  Labour costs and wage share 

Source: European Commission and Danmarks Nationalbank 

by 

the  current  account 

While 
surplus  has 
decreased,  it  remains  well  above  the  level 
warranted 
fundamentals 
supported  by  high  household  savings.  The 
current  account  norm  is  the  value  of  the  current 
account  that  should  be  observed  on  the  basis  of  a 
country’s  fundamental  characteristics. (30)  Since 

economic 

(30)  The  current  account  ‘norm’  benchmark  is  derived  from 
reduced-form  regressions  capturing  the  main  fundamental 
the  saving-investment  balance  (e.g. 
determinants  of 
demographics,  resources),  as  well  as  policy  factors  and 
global financial conditions. See also European Commission 
(2017c). 

2008,  the  current  account  norm  and  the  actual 
current  account  have  diverged.  Households  have 
driven this change. Seen over a longer time period, 
lending  balance  has  been 
households’  net 
countercyclical. However, recent years have seen a 
gradual  increase  in  the  net  lending  balance  of 
households,  despite  a  gradual  closing  of  the 
negative  output  gap  (Graph  3.4.2).  Increased 
household  savings  reflect  households’  efforts  to 
reduce debt,  and have  more than offset increasing 
household investment,  which  is largely residential 
investment.  

retain  ownership  of 

is 
The  external  position  of  the  economy 
supported  by 
large  Danish  multinational 
companies producing and selling goods abroad. 
the 
Danish  companies 
intellectual  property  and  control  of  sales 
to 
customers. Since the companies own the produced 
goods,  the  sales  of  these  goods  are  recorded  as 
exports and the purchase of factor input is recorded 
as imports. Net exports stemming from production 
and sales abroad have gradually gained importance 
and amounted to 2.5 % of GDP in 2018.  

Graph 3.4.2:  Private sector net lending balance and output 

gap 

Source: European Commission 

Productivity and investment developments 

is  key 

infrastructure 

Investment  in  the  education  system,  R&D  and 
transport 
to  boost 
productivity  growth.  Maintaining  the  high  level 
of investment in education will allow Denmark to 
face  the  challenges  of  a  changing  labour  market. 
Labour  shortages  are  increasing  and  companies 
report that the lack of skilled  workers is the  main 

33 

4648505254565801234561995Q11996Q21997Q31998Q42000Q12001Q22002Q32003Q42005Q12006Q22007Q32008Q42010Q12011Q22012Q32013Q42015Q12016Q22017Q3%%, y-o-yLabour costs, DenmarkLabour costs, trading partnersWage share, private sector, Denmark-5-4-3-2-1012345-8-6-4-2024681012199519971999200120032005200720092011201320152017% of potential growth% of GDPHouseholdsCompaniesOutput gap, rhs 
 
 
                                                           
 
3.4. Competitiveness reforms and investment 

the 

same  period.  At 

annually  over 
the 
economy wide  level,  increasing  production  and 
sales  abroad  in  the  manufacturing  sector  have 
boosted annual productivity growth on average by 
(pps)  per  year.  This 
0.2 percentage  points 
highlights  not  only 
strong 
relatively 
the 
productivity growth in the tradable sector, but also 
the  weaker  productivity  growth  of  companies 
oriented towards domestic sectors. 

Investment  has  continued  its  upward  trend. 
Since  its  ten-year  low  at  18.1 %  of  GDP  in  2010, 
investment has increased faster than in the EU as a 
in  construction, 
whole.  Greater 
investments 
transport 
and 
information 
communication technology products were the main 
drivers  of  this  increase.  Investment  in  intellectual 
property products, which accounts for a quarter of 
total investment, is still at a high level in Denmark.  

equipment 

and 

The  availability  of  skilled  staff  is  the  main 
investment  barrier  for  firms 
in  Denmark, 
according to the EIB investment survey (European 
Investment  Bank,  2018).  In  2018,  all  sectors 
reported  the  lack  of  skilled  staff  as  the  most 
significant  investment  barrier.  It  was  the  most 
significant barrier for 71 % of firms in the services 
sector  and 
the 
construction  sector  (total  economy:  76 %).  For 
most sectors,  uncertainty about the future  was the 
second  largest  investment  barrier.  Only  firms  in 
the 
labour 
regulations  as  being  the  second  biggest  barrier 
(59 %  of  firms).  Other  factors,  e.g.  business 
regulations or demand, are less significant for most 
companies.  

for  92 %  of  companies 

sector  mentioned 

construction 

in 

Research, innovation and digitisation 

Denmark  acknowledges  the  significant  role  of 
research  &  innovation  (R&I)  investments  as 
growth  enablers.  Denmark  had  one  of  highest 
research and development (R&D) intensities in the 
EU  in  2017.  At  3.1 %  of  GDP,  it  has  already 
reached the 2020 target of 3 % of GDP. However, 
R&D  intensity  has  stagnated  since  2009,  mostly 
due to a decrease in business expenditure on R&D 
as  a  percent  of  GDP  (BERD)  (although  R&D 
intensity  is  still  high  compared  to  other  EU 
and 
Member  States.  The 
biotechnology  sectors  remain  the  clear  leaders  in 
R&D spending in Denmark due to the presence of 
leading  global  pharmaceutical  companies.  As  part 

pharmaceutical 

investment  barrier.  This  underlines  the  need  to 
prioritise  investment  in  vocational  education  and 
training,  adult-  and  lifelong  learning  (see  Section 
3.3).  Despite  the  high  overall  R&D  level,  the 
concentration of R&D activities in a small number 
of  large  firms  calls  for  R&D  capacity  building 
within 
small  and  medium-sized  enterprises. 
Finally,  road  congestion  around  larger  cities, 
combined  with 
the 
transport  sector,  point  to  investment  opportunities 
in transport infrastructure. 

to  decarbonise 

the  need 

Denmark’s  productivity  growth  has  slowed 
down  in  recent  decades  (Graph  3.4.3).  This  is 
broadly in line with the EU as a  whole (European 
Commission, 
productivity 
2018d).  Sectoral 
developments  have  been  mixed.  Manufacturing 
productivity  growth  has  been  relatively  strong, 
while  productivity  growth  has  been  much  weaker 
in 
the  services  sector.  Domestically  oriented 
services  sectors  in  particular  have  shown  weak 
productivity growth.  

Graph 3.4.3:  Productivity growth 

Source: Statistics Denmark 

at 

growth 

productivity 

The  production  and  sale  of  goods  abroad  has 
boosted 
the 
economy wide level, masking weak productivity 
gains  in  the  non-tradable  sectors.  Value  added 
from producing and selling goods abroad makes up 
net  exports,  and  this  is  normally  associated  with 
little  employment.  Knudsen  (2018)  shows  that 
productivity in the manufacturing sector rose by an 
average  of  3 %  annually  from  2005  to  2017. 
However,  when  companies  producing  and  selling 
goods  abroad  are  excluded,  productivity 
in 
manufacturing  only  grew  on  average  by  2 % 

34 

-2-1012345678196719691980198219841986198819901992199419961998200020022004200620082010201220142016%, y-o-y 
 
3.4. Competitiveness reforms and investment 

the  2017  Shanghai 
ranking  per  million  of 
population.  Through  its  2017  strategy  for  R&I, 
Denmark: Ready to seize future  opportunities, the 
government  wants  to  further  boost  the  quality  of 
Danish  research  to  meet  the  highest  international 
standards  while  aligning  research  with  pressing 
societal  challenges.  One  example  is  the  ‘pioneer 
centre’  initiative  aiming  at  ground  breaking  basic 
research. 

Increasing  the  efficiency  of  the  R&I  system  to 
boost  overall  productivity  is  a  priority.  Despite 
being  a  top  R&D  investor  in  the  EU,  Denmark’s 
scientific  excellence  has  rarely  materialised  into 
ground-breaking  innovation.  Denmark  ranks  only 
13th in employment in fast-growing enterprises in 
innovative  sectors  and  the  share  of  high-growth 
firms  is  below  the  EU  average.  Reinforcing  the 
entrepreneurial  ecosystem  by  helping  small  and 
medium-sized  enterprises 
to  access  advanced 
business  support  could  boost  employment  in  fast-
growing  enterprises.  At 
time,  co-
operation  on  internationalisation  and  interregional 
clusters could also be encouraged. Moreover, since 
innovators  depend  greatly  on  risk 
disruptive 
financing,  the  fact  that  venture  capital  as  a 
percentage  of  GDP  decreased  between  2007  and 
2016  constrains 
innovative 
companies. The Danish government has requested 
a  peer  review  under  the  Horizon  2020  policy 
support  facility  to  look  into  ways  to  support  ‘ 
world-class knowledge-based innovation’ focusing 
on  knowledge-based  technological  services  for 
businesses,  collaboration,  and  networks  and 
knowledge-based entrepreneurship. 

the  scaling-up  of 

the  same 

specialisation 

Denmark  has 
towards  smart 
taken  steps 
specialisation.  Although  Denmark  has  no  formal 
smart 
strategy,  a  number  of 
strategies,  including  the  government’s  growth 
plans  and  the  regional  growth  strategies,  are 
oriented towards smart specialisation. In particular, 
the  regional  growth  fora  coordinate  and  ensure 
synergies  between 
the  Danish  government’s 
growth  strategy  and  specific  regional  strengths. 
Moreover,  Denmark  takes  part  in  the  activities  of 
the smart specialisation platform.  

Denmark is positioned high in the EU in the use 
of  digital  technologies  by  enterprises  (61 %  in 
2017). Nevertheless, the authorities aim to  further 
strengthen 
the  digitisation  and  e-commerce 
through  its  digital  growth  strategy.  One  of  the 

of 
the  government’s  political  agreement  on 
business  and  entrepreneurial  activities  from  2017, 
corporate 
tax  deductions  for  BERD 
investments will gradually increase from 100 % to 
110 % as of 2026. 

income 

tax 

Innovation is concentrated in a relatively small 
number of large enterprises. Although Denmark 
is  an  innovation  leader  overall  according  to  the 
European  Innovation  Scoreboard  (EIS)  2018,  this 
is  due  to  investment  in  R&D  by  a  few  very  large 
businesses. Business expenditure in R&D (BERD) 
in  small  and  medium-sized  enterprises  as  a 
percentage of GDP slightly declined between 2007 
and 2015 but remains among the highest in the EU 
despite  Denmark’s  below-EU-average  public 
support  for  BERD  i.e.  direct  government  support 
(OECD,  2018b). 
and  R&D 
incentives 
However,  about  70 %  of  business  R&D 
is 
performed  by  the  top  50  R&D  performers  in  the 
country  which  is  a  high  percentage  in  the  OECD 
context  (OECD,  2017).  This  may  indicate  that 
there  is  a  need  to  foster  spillovers  from  large 
companies to small and medium-sized enterprises. 
In  addition,  the  share  of  small  and  medium-sized 
enterprises 
introducing  product  or  process 
innovation  is  declining.  Sales  of  new-to-market 
and  new-to-firm  innovations  is  now  below  the 
European  average.  There  is  therefore  a  need  to 
further  build  up  capacities  in  small  and  medium-
sized enterprises to internalise external knowledge 
and new technologies. 

Over  the  last  decade,  a  process  of  structural 
change  towards  high-technology  sectors  has 
taken  place  in  Denmark.  The  joint  contribution 
of  high-tech  manufacturing,  medium-high-tech 
manufacturing  and  knowledge-intensive  services 
to  gross  value  added  (GVA)  increased  between 
2007 and 2016 and corresponds to more than half 
of Denmark’s GVA. In particular, the value added 
from high-tech manufacturing increased by almost 
10 % in the last ten years.  

scientific 

The  public  science  base  is  characterised  by  its 
high  quality  and  increasing  openness.  In  2016, 
Denmark outperformed other EU member states in 
international 
collaboration  when 
measured  by  co-publications  per  capita  of 
population.  On  scientific  excellence,  the  country 
ranks 
in  highly  scientific 
publications  in  the  top  10 %  of  citations  (2014-
2017)  as  well  as  in  the  number  of  universities  in 

the  EU 

third 

in 

35 

 
3.4. Competitiveness reforms and investment 

planning for 2030, it will therefore be cost efficient 
to  prioritise  those  aspects  of  transition,  that  also 
form part of the long-term vision. This includes in 
require  new 
particular 
technology 
investments 
and 
(Klimarådet, 2018).  

that 
long-term 

large  changes 

Investing  in  reducing  emissions  and  in  limiting 
the  risk  of  damage  from  climate  change  will 
reduce  the  costs  of  climate  change  mitigation 
and  adaptation.  Electricity  consumption  may 
increase as a result of electrification within heating 
and  transport,  and  as  a  result  of  new  activities.  A 
study  of  the  future  for  large  data  centres  in 
Denmark  showed,  in  a  main  scenario,  that  data 
centres  could  need  7  TWh  of  electricity  in  2030, 
which  corresponds  to  20 %  of  current  electricity 
consumption  (COWI,  2018).  Investments  in  new 
electricity  generation  are  price  sensitive  and 
Danish projections showed that  without continued 
support  to  renewables,  new  electricity  generation 
could  be  based  on  coal  rather  than  renewables 
(Energistyrelsen,  2018). In  the  Energy  Agreement 
2018, it was agreed that the government will open 
a tender for one off-shore wind park in 2019/2020 
and  will  aim  to  establish  another  two  off-shore 
wind  parks  by  2030.  The  Energy  Agreement  also 
plans  to  gradually  reduce  the  number  of  on-shore 
wind  turbines  (Ministry  of  Energy,  Utilities  and 
Climate, 2018).  

Climate-related  events  already  have  significant 
costs  for  Danish  society.  The  direct  cost  of 
extreme  weather  has  been  estimated  at  EUR 10 
billion  over  the  period  1980-2016  (European 
Environment  Agency,  2017).  This  is  the  highest 
per capita cost among the EU Member States. The 
national  strategy  for  adaptation  to  climate  change 
outlined  11  sectors  in  which  climate  impacts  may 
be  significant  (31).  The  relevant  ministries  have 
developed 
for 
transport, roads and coasts. 

sectoral  adaptation 

strategies 

(31)  These  sectors  are  coastal  management,  dikes,  ports  etc; 
buildings  and  infrastructure;  water  supply;  energy  supply; 
agriculture  and  forestry;  fisheries;  nature  management; 
land use planning; health; rescue preparedness; insurance.  

is 

the 

initiatives 
small  and  medium-sized 
enterprises:  Digital  that  provides  grants  to  help 
clarify  how  the  company  can  be  digitised  and  to 
identify  the  economic  and  business  potential.  The 
initiative  also  aims  at  improving  the  use  of  e-
commerce by small and medium-sized enterprises. 
Only  31 %  of  Danish  small  and  medium-sized 
enterprises  sell  online,  while  the  percentage  for 
large enterprises is almost double that (57 %). 

Transition to a low-carbon economy 

The Danish economy is among the most energy 
efficient  in  the  EU.  In  2017,  the  greenhouse  gas 
intensity  of  the  economy,  defined  as  the  ratio 
between  greenhouse  gas  emissions  and  GDP,  was 
considerably  lower  than  the  EU  average.  Only 
Sweden  had  a  lower  greenhouse  gas  intensity. 
Environmental  goods  and  services  contributed  to 
the  Danish  economy  with  a  gross  value  added  of 
EUR 8.4  billion  (0.5 %  of  GVA)  in  2015,  and 
employment in  these  sectors  grew  from 66 000 in 
2012 (2.4 % of total employment) to almost 76 000 
in 2015 (2.7 % of total employment).   

While  Denmark  is  on  track  to  achieve  its  2020 
emissions  reduction  target  for  sectors  not 
covered  by  the  EU  emissions  trading  system, 
stronger  efforts  will  be  needed  to  achieve  the 
2030  target  of  reducing  emissions  by  39 %. 
According  to  the  latest  projections  based  on  the 
existing  policies  as  of  April  2018,  emissions  are 
expected to decrease by 24 % by 2030, i.e. 15 pps 
below  target.  However,  in  October  2018  the 
government presented its climate and air proposal, 
which includes new initiatives that can close parts 
of  this  gap.  According  to  the  Climate  Council 
in 
(Klimarådet,  2018), 
Denmark  sufficiently  to  reach  the  target  could  be 
accomplished  at  the  same  time  as  creating  a  net 
socio-economic  benefit.  For  example,  energy 
renovations of buildings or the conversion to  heat 
pumps  and  solar  heating  are 
identified  as 
investments  that  may  contribute  to  significant 
emissions reductions at relatively low cost.  

emissions 

reducing 

A cost-efficient transition towards a low-carbon 
society by 2050 requires a significant part of the 
transition  to  take  place  before  2030.  Denmark 
aims  to  achieve  net-zero  emission  by  2050.  This 
will  require  a  gradual  transition  throughout  the 
period,  as  an  accelerated  transition  over  a  shorter 
period  of  time  would  cause  costs  to  rise.  When 

36 

 
                                                           
3.4. Competitiveness reforms and investment 

unlikely  that  the  observed  increases  in  mark-ups 
could  have  taken  place  in  a  more  competitive 
mortgage  market.  The  preconditions  for  effective 
competition  are  not  in  place  as  the  market  is 
dominated  by  four  mortgage  providers.  There  are 
barriers  to  entry  and  expansion  (regulatory  and 
non-regulatory)  and 
in 
establishing  a  competitive  system  of  mortgage 
distribution  (Danish  Competition  and  Consumer 
Authority, 2017).  

there  are  difficulties 

Measures  have  been  implemented  to  increase 
competition  in  the  mortgage  credit  market.  In 
May  2018,  a  political  agreement  was  reached  to 
require home sales to involve the use of an online 
price  comparison  tool  provided  by  the  Danish 
Financial  Supervisory  Authority.  As  of  January 
2019,  mortgage  banks  are  also  obliged  to  inform 
borrowers  about  the  possibilities  and  risks  of 
trading  the  covered  bonds  behind  their  loans 
themselves. 

Logistics sector 

The logistics sector is an important pillar of the 
Danish  economy.  Wholesale  trade,  which  is 
closely  linked  to  the  logistics  sector,  has  been 
identified  as  a  particularly  important  sector  in 
Denmark  (Dachs  et  al.,  2016).  With  a  share  of 
almost  12 %  of  total  employment  in  the  non-
financial  business  sector,  Denmark  (after  Greece 
with  13 %,  EU:  8 %)  stands  out  in  the  EU. 
Wholesale  trade  in  Denmark  is  above  the  EU 
average in terms of turnover and value added.  

The ‘growth team’ set up to examine the trade 
and  logistics  sector  has  handed  over  its  final 
report. To address challenges related to increasing 
digitisation  and  changing  consumption  and 
production  patterns,  the  government  had  asked  a 
team  of  business  representatives  to  come  up  with 
proposals  on  how  to  support  and  future-proof  the 
sector  in  a  growing  digital  world.  In  November 
2018, this ‘growth team’ presented 24 proposals in 
three areas (i) how to foster growth and the digital 
transformation,  (ii)  how  to  create  a  national  and 
international  level  playing  field,  and  (iii)  how  to 
simplify  everyday  business  (Ministry  of  Industry, 
Business and Financial Affairs, 2018b). 

3.4.2.  SINGLE MARKET INTEGRATION AND 

SERVICES SECTOR 

Competition in services markets 

Retail sector 

establishment 

remains  difficult 

Despite the recent reform of the Planning Law, 
retail 
in 
Denmark.  According  to  the  Commission’s  retail 
restrictiveness  indicator  (RRI) (32),  Denmark  is 
among  the  most  restrictive  Member  States  for 
retail  establishment.  Rules  on  shop  location  and 
size, the level of detail required in the local plans, 
and  the  requirement  to  provide  economic  data  in 
the  establishment  process  contribute  to  this  score. 
At  the  same  time,  however,  Denmark  displays  a 
very 
the  daily 
level  of  restrictions  on 
operations  of  retailers.  Denmark’s  average  of 
consumer  price  levels  in  all  product  categories  in 
2017 was still the highest in the EU. 

low 

for 

new 

directive 

planning 

A 
retail 
establishment in the Capital region entered into 
force  on  1 January  2019.  The  directive 
implements  the  rules  set  out  in  the  revised 
Planning Act adopted in 2017, which has provided 
municipalities with more flexibility in taking local 
conditions  into  account  in  the  planning  process. 
Based  on  the  Directive,  some  municipalities  will 
be able to provide new areas for shops that cannot 
easily be established in city centres,  such as large 
surface  retail  and  shops  selling  bulky  goods..  The 
areas  will  be  reserved  for  non-food  stores. 
Emphasis  has  been  placed  on  achieving  an 
appropriate balance between the need to create an 
efficient  store  structure  and  to  maintain  the 
existing store supply in the city centres. It  will be 
important 
the  new  planning 
that 
regulations  do  not  create  undue  market  entry 
barriers. 

to  ensure 

Competition in the mortgage credit market 

There is scope for improving competition in the 
Danish  mortgage  market.  Increasing  operational 
and  capital  costs  cannot  explain  the  sharp  rise  in 
the  price  of  mortgage  loans  since  2009.  It  is 

(32)  See the Commission’s Communication “A European retail 
sector  fit  for the 21st century”  COM(2018)  219  final,  and 
in  particular  its  Annex  with  the  Retail  Restrictiveness 
Indicator,  as  well  as  the  accompanying  Staff  Working 
Document. 

37 

 
                                                           
3.4. Competitiveness reforms and investment 

flows  between  Denmark  and  Germany  (DK1-DE) 
have increased in 2018.  

Danish  households  continue  to  pay  the  highest 
electricity prices in the EU  due  to a high share 
of  taxes  and  levies  in  the  final  energy  bill.  The 
reduction of the electricity tax provided for in the 
June  2018  political  agreement  will  contribute  to 
alleviate  this  concern.  Furthermore,  the  Public 
Service  Obligation  (PSO)  tax  on  electricity  use  is 
gradually  being  phased  out  towards  2022  leading 
to  further  decreases  in  the  final  consumer  prices. 
The  substantial  decrease  in  wholesale  electricity 
prices  of  39.7 %  between  2013  and  2015  has  not 
translated into reductions in final consumer prices, 
which  increased  by  3.6 %  in  the  same  period  for 
for 
Danish  households.  High  energy  prices 
households in Denmark are mostly due to the share 
of taxes in households’ prices. This share of taxes 
is among the highest in the EU for both electricity 
and gas, and  more than twice the share  of the EU 
average (69.1 % in Denmark vs 32.6 % in the EU 
for electricity and 57.3 % in Denmark vs 27.2 % in 
the EU for gas in 2015).  

In  its  National  Energy  and  Climate  Plan  (NECP), 
to  be  adopted  by  31 December  2019  in  line  with 
the  Regulation  on  the  Governance  of  the  Energy 
Union  and  Climate  Action(33),  Denmark  will 
provide  an  overview  of  its  investment  needs  until 
2030  for  the  different  dimensions  of  the  Energy 
Union.  Denmark  submitted  its  draft  NECP  on  21 
December  2018,  which  is  to  be  assessed  by  the 
European  Commission.  The  draft  presents  the 
prioritised  budgets  for  the  period  2018-2025, 
which  amount  to  DKK 0.5  billion  in  2019  and 
increases  to  DKK 2.8  billion  in  2025.  Priorities 
over  the  2018-2025  period  are  identified  as  the 
reduction of taxes on electricity (DKK 5.5 billion), 
targeted  energy  saving  effort  (DKK 2.3  billion), 
renewable  energy  on  market  conditions  (DKK 1.5 
billion)  and  world  class  offshore  wind  (DKK 0.9 
billion).  

(33)  Regulation  (EU)  2018/1999  of  the  European  Parliament 
and  of  the  Council  of  11  December  2018  on  the 
Governance  of  the  Energy  Union  and  Climate  Action, 
amending  Regulations  (EC)  No  663/2009  and  (EC)  No 
715/2009  of  the  European  Parliament  and  of  the  Council, 
Directives  94/22/EC,  98/70/EC,  2009/31/EC,  2009/73/EC, 
2010/31/EU, 2012/27/EU and 2013/30/EU of the European 
Parliament  and  of 
the  Council,  Council  Directives 
2009/119/EC and (EU) 2015/652 and repealing Regulation 
(EU)  No  525/2013  of  the  European Parliament and  of  the 
Council (Text with EEA relevance.) 

Collaborative economy 

Denmark is implementing its recently launched 
strategy for the collaborative economy. A recent 
Eurobarometer  survey  (European  Commission, 
2018b)  indicates  that  26 %  of  respondents  from 
Denmark  (EU:  23 %)  have  used  a  service  offered 
via collaborative platforms, most frequently in the 
transport  and  accommodation  sectors.  In  May 
2018,  the  government  and  several  opposition 
parties  reached  an  agreement  on  more  attractive 
conditions  for  the  collaborative  economy.  As  part 
of  the  agreement,  a  one-stop-shop  for  companies 
has  been  established  serving  as  a  single  point  of 
contact  providing  information  and  guidance  on 
rules. Moreover, the government wants to increase 
and simplify tax deductions for incomes generated 
from  short-term  accommodation  rentals  up  to  70-
100  nights  per  year 
the 
municipality)  and  the  private  hire  of  cars  and 
boats, as long as these activities are intermediated 
by  platforms  that  report  the  income  generated  to 
the  tax  authorities.  The  government  thereby  seeks 
to promote entrepreneurship and transparency and 
to  facilitate  tax  compliance  in  the  sector.  This 
implemented  by  follow-up 
approach,  recently 
legislation  adopted  in  December  2018,  seems 
therefore  to  incentive  the  development  of  the 
collaborative  economy.  Draft  legislation  on  short-
term  rental  of  accommodation  is  also  being 
discussed.  These  developments  also  benefitted 
from the work done by the Disruption Council. 

(depending  on 

Energy system 

Denmark  plays  an  active  part  in  the  cross-
border  trade  of  gas  and  electricity.  However, 
domestic  markets  would  benefit  from  increased 
competition.  This  issue  of  increased  competition 
was  addressed  by 
the  June  2018  political 
agreement  to  promote  markets  for  ocean  wind 
energy.  Denmark’s  own  gas  production  will  be 
largely  on  hiatus  during 
field 
refurbishment  scheduled  for  2019-2022.  While  it 
has  typically  been  a  gas  exporter,  during  this 
period Denmark will be fully relying on the market 
(and  in  particular  on  imports  from  Germany)  to 
meet  the  demand  from  both  Danish  consumption 
and 
the  dependent  Swedish 
market.  At  50.6 %,  Denmark  has  a  level  of 
electricity  interconnection  above  the  10 %  target 
for 2020. Following  further progress, cross border 

through-flow 

the  Tyra 

to 

38 

 
                                                           
3.4. Competitiveness reforms and investment 

3.4.3.  INFRASTRUCTURE 

Transport sector 

has 

roads, 

high-quality 

Denmark 
but 
congestion is increasingly a problem. In terms of 
road  quality,  Denmark  ranks  among  the  top  five 
EU  Member  States  (World  Economic  Forum, 
2018) with its well-developed road network. Since 
2008, the investment rate in road infrastructure has 
gradually increased to a level comparable with the 
EU  average.  Road  congestion 
is,  however, 
increasing,  particularly  around  the  large  cities. 
Projections  from 
the  Ministry  of  Transport, 
Building  and  Housing  (2018)  suggest  that  in  ten 
years’ time car commuters will spend 150 % more 
time each year in congestion than they did in 2018. 

Denmark has put forward plans to electrify the 
national  railway  network.  While  the  total  rail 
density in per capita terms is comparable with the 
EU  average,  the  share  of  electrified  rail  currently 
ranks  among  the  lowest  in  Europe,  at  25 %.  The 
ratio  of  electrified  rail  length  to  rail  passenger 
kilometres in Denmark is among the lowest in the 
EU.  Denmark  ranks  at  the  lower  end  of  the  euro 
area  countries 
railroad 
infrastructure 
the  Global  Competitiveness 
Report  (World  Economic  Forum,  2018).  In  June 
2018,  the  Danish  railway  operator  announced 
plans  to  electrify  the  national  railway  network, 
with broad support from parliament.  According to 
the plan, the  new electrified trains on the  national 
network will be up and running in 2022. 

the  quality  of 

in 

in 

Broadband 

have 

2018b). 

of  homes, 

respectively 
The 

Denmark  has  maintained  its  high  coverage  of 
fixed  broadband  and  next-generation  access 
networks,  which  are  available  to  99 %  and 
95 % 
(European 
been 
Commission, 
improvements in upload capacity, in line  with the 
aim  of  the  Danish  government  action  plan  to 
ensure 100 % coverage of 30 Mbps upload speeds. 
However, next-generation access (NGA) networks 
in  rural  areas  are  only  available  to  66 %  of 
households  (Agency  for  Digitisation,  2016).  This 
is  clearly  below  the  national  figure  of  95 %,  but 
well  above  the  EU  average  of  47 %.  In  mobile 
broadband,  high 
take-up  of  130  broadband 
subscriptions per 100 people (the EU average is 90 
subscriptions per 100 people) and full 4G coverage 

it 

has 

Instead, 

(100 %)  were  reported.  Denmark  does  not  have  a 
dedicated national broadband plan like some other 
EU  Member  States. 
a 
telecommunications  agreement,  which  is  a  wide 
political  agreement  covering  different  areas  such 
as  broadband,  5G,  access 
frequencies, 
deployment funds, etc. In addition, the Innovation 
Fund  Denmark  has  allocated  funds  to  several 
major  5G  projects  involving  universities,  industry 
and operators. 

to 

To  promote  access  outside  urban  areas,  the 
government  has  committed  to  further  enhance 
network  quality  in  rural  areas.  For  this  reason, 
Denmark  allocated  DKK 290  million  of  public 
funds  between  2016  and  2019.  Municipalities 
in  network 
facilitating 
mainly  play  a 
deployment  without  providing  direct  financial 
contributions.  The 
leading 
negotiations  on  a  cross-party  political  agreement 
on  rural  broadband.  Coverage  in  terms  of  NGA 
wireline networks, notably in underserved areas, is 
needed  to  realise  the  government’s  ambitions  of 
fast broadband everywhere. 

government 

role 

is 

3.4.4.  INSTITUTIONAL QUALITY AND 

GOVERNANCE  

Business environment 

offers 
to 

and  medium-sized 

a 
favourable  business 
Denmark 
companies.  Remarkably, 
environment 
Denmark shows above-average results in seven out 
of ten areas measured under the European Union’s 
small 
enterprise  policy 
(European  Commission,  2018e).  The  country’s 
small and open economy is the EU’s top performer 
in  internationalisation  of  small  companies,  and  it 
offers  favourable  conditions  for  doing  business  in 
the single market.  Denmark has been successful in 
keeping  administrative  burden  in  check,  ensuring 
that  public  administration  is  responsive  to  the 
needs  of  SMEs,  and  providing  easy  to  use  e-
government facilities.  

The reform of the business support system is an 
opportunity to build on current strengths. Since 
1  January  2019,  the  structure  of  public  business 
support  has  been  re-organised  in  Denmark.  The 
regional  growth  fora  have  been  abolished,  and 
their  responsibilities  have  been  divided  between 
local  authorities  and  a  new  state  actor,  the 

39 

 
3.4. Competitiveness reforms and investment 

SMEs  experience  unnecessary  and  burdensome 
legislation.  

Digital public services 

the 

first 

The  initiatives  in  the  digital  strategy  for  2016-
2020  have  delivered 
results, 
strengthening  Denmark’s  worldwide  leading 
position  in  public  service  digitisation.  90 %  of 
people  submit  official  forms  to  administrative 
authorities  electronically,  well  above  the  EU 
average  (56 %),  and  Denmark  is  a  frontrunner  in 
making  domestic  and  cross-border  online  public 
services for businesses. Denmark has also focused 
on  developing  a  so-called  eID  gateway  that  will 
enable EU citizens to use their national eID to log 
into  another  EU  country’s  digital  self-service 
solutions.  

Business  Support  Board.  With  the  new  board 
responsible  for  setting  an  overall  strategy,  it  is 
important  that  this  strategy  builds  on  the  work 
done in the regional smart specialisation strategies. 
A  new  national  business  support  strategy  is 
planned 
to  facilitate  better  coordination  and 
synergy  between  different  initiatives  and  funding 
sources. 

Denmark’s  policymaking  process  is  inclusive 
and  stakeholders  feel  that  their  concerns  are 
being heard. The Danish government has pursued 
regulatory reform for years, and has a strong track 
record  in  collaboratively  working  with  business 
stakeholders 
this 
progress  made  in  recent  years  is  thanks  to  the 
Business  Forum,  which  highlights  areas  where 

(OECD,  2018c).  Much  of 

40 

 
3.4. Competitiveness reforms and investment 

Box 3.4.1: Investment challenges and reforms in Denmark 

Macroeconomic perspective  

At  an  estimated  21.7 %  of  GDP  in  2018,  aggregate  investment  in  Denmark  has  risen  above  EU 
average  levels.  Public  investment  continues  to  remain  high.  Corporate  investment  is  gaining 
momentum,  reaching  levels  above  its  average  for  the  past  three  decades.  However,  it  remains 
broadly in line with the economic cycle. Moreover, household investment has picked up from low 
levels, supported by rising housing prices.  

Assessment of barriers to investment and ongoing reforms  

Overall, barriers to private  investment  in Denmark are  moderate. In recent  years, parliament has 
adopted reforms to liberalise retail planning and increase competition in the taxi sector. Building 
regulations  have  also  been  amended,  making  it  easier  to  build.  Recent  initiatives  also  help  to 
further  foster  cooperation  between  academia,  business  and  the  research  community.  However, 
private R&D expenditure remains concentrated in larger companies. In 2018, parliament adopted 
reforms  to  strengthen  competition  in  the  mortgage  market,  addressing  concerns  raised  by  the 
Competition Council. Denmark also implemented reforms to lower consumer prices for utilities.  

Main barriers to investment and priority actions underway 
1. The main barrier to investment is  weak competition. In recent  years, the  government has also 
adopted  measures  to  enhance  competition  in  the  retail,  construction,  taxi  and  mortgage  credit 
sectors.  Further  reforms  are  needed  to  raise  competition,  particularly  in  domestically  oriented 
services sectors. 

2.  The  lack  of  skilled  staff  hampers  investment  for  firms  in  Denmark,  according  to  the  EIB 
investment survey (EIB, 2018). While a number of recent labour market and education reforms 
seek to address this issue, it is also key to reduce the dropout rates of students and to incentivise 
them to choose vocational education and training (VET). Moreover, investment in research and 
innovation is concentrated in a number of larger companies. This suggests that it is important to 
broaden the innovation base to include more firms and to ensure innovation diffusion. 

3. Denmark needs to invest in its transport infrastructure. The investment need is particularly high 
in the road infrastructure around Copenhagen, where congestion is already high and projected to 
increase.  At  the  same  time,  there  is  a  need  to  decarbonise  the  transport  sector  and  reduce  air 
pollution. Significant growth is projected in fast freight and passenger transport, and this is likely 
to  put  further  pressure  on  transport  systems.  In  2018,  Denmark  adopted  plans  to  electrify  the 
national  railway  network.  According to these plans, these  new electrified trains  will be running 
on the national network in 2022 (see Section 3.4). 

The Danish Growth Fund and the Innovation Fund are the Danish state’s investment funds. The 
Growth Fund supports and promotes growth for start-ups as well as for small and medium-sized 

41 

 
 
3.4. Competitiveness reforms and investment 

enterprises. The Innovation Fund supports research and innovation projects. The funds contribute 
by providing capital and expertise. In 2017, the Danish Growth Fund supported more than 800 
companies  by  providing  capital  amounting  to  DKK 2.5 billion  (1.2 %  of  GDP)  while  the 
Innovation Fund provided funding amounting to DKK 1.2 billion (0.6 % of GDP).  

42 

 
ANNEX A: OVERVIEW TABLE 

Commitments  

Summary assessment (1)  

2018 country-specific recommendations (CSRs)  

CSR  1:  Increase  competition  in  domestically  oriented 
services  sectors,  for  instance  in  the  distribution  of 
utilities and in the financial sector.  

Denmark  has  made  some  progress  in  addressing 
CSR 1:  

In  2018,  Denmark  has  implemented  measures  to 
enhance  competition 
the  financial  sector. 
in 
Moreover,  Denmark  has  continued  its  work  with 
implementing 
the  utilities  strategy.  Political 
agreements  on  measures  in  the  water  and  sewage 
water sector were reached in October 2018. 

Europe 2020 (national targets and progress)  

Employment rate target set in the NRP: 80 %.  

76.9 % (2016) 

The  employment  rate  has  increased  moderately, 
from  75.6 %  in  2013  to  76.9 %  in  2017.  It 
remains, however, below pre-crisis levels (79.7 % 
in  2008).  Denmark  has  adopted  a  series  of  active 
labour  market  reforms  in  recent  years,  aiming  at 
increasing  the  incentives  to  work  ('make  work 
to 
pay').  These  measures  are  also  expected 
contribute  closing  the  3.1 percentage  point  gap 
from  Denmark’s 
2020 
employment target (80 %). 

national  Europe 

Research and development target set in the NRP: 3 % of 
GDP  

3.1 % (2017) 

Research  and  development  (R&D)  intensity  in 
Denmark has been above 3 % of GDP since 2015. 
In  2017,  R&D  intensity  reached  3.1 %  of  GDP. 
Business R&D investments in the country account 
for  around  2/3  of  total  R&D  expenditure,  while 
there  is  a  political  commitment  to  keep  R&D 
intensity at least at 1 % of GDP.  

Greenhouse 

gas 

emissions, 

national 

target:  

2020-target: -20 % 

-20 % in 2020 compared to 2005 (in non-ETS sectors)  

Emissions  in  the  sectors  not  covered  by  the 
Emissions  Trading  System  (ETS)  are  expected  to 
be 22 % lower in 2020 than in 2005, according to 
the  latest  national  projections  and  taking  into 
account  existing  measures.  Denmark  is  therefore 
expected  to  achieve  its  2020-target  with  a  small 

43 

 
 
 
 
 
A. Overview Table 

margin.  

2017 interim target: -13 % 

Emissions in 2017 were 19 % lower than in 2005, 
according to approximated data. The interim target 
was thereby achieved. 

2020 renewable energy target: 30 %  

35.8 % (2017) 

With a 35.8 % share of renewable energy in final 
energy consumption in 2017, Denmark is on track 
to  meet  its  2020  target  of  30 %.  Progress  is  most 
noticeable  in  electricity  generation  (biomass  and 
wind energy) and in heating (largely biomass).   

Energy efficiency, 2020 energy consumption targets:  

17.7 Mtoe of primary energy consumption (2017)  

17.38 Mtoe (primary energy consumption);  

14.39 Mtoe (final energy consumption).  

its 

primary 

increased 

energy 
Denmark 
consumption by 2.41 % from 17.04 Mtoe in 2016 
to  17.7  Mtoe  in  2017.  Final  energy  consumption 
increased  by  1.2  %  from  14.  Mtoe  in  2016  to 
14.46Mtoe in 2017.  

After two consecutive years of increase in energy 
consumption,  Denmark  is  above  its  indicative 
national  2020  target  in  terms  of  primary  energy 
consumption (16.89 Mtoe). 

Final  energy  consumption  has  also  increased  but 
target,  but  only  because 
remains  below 
Denmark also in 2018 changed the target to align 
it with a higher expected consumption. 

its 

Denmark’s  practice  of  updating  its  indicative 
targets  so  that  they  correspond  to  the  level  in  the 
latest  available  baseline 
forecasts  will  by 
definition  tend  to  narrow  or  eliminate  any  gaps 
between targets and actual energy consumption as 
2020 gets closer. These gaps are therefore not the 
best  indicators  for  Denmark’s  contribution  to  the 
EU  2020  headline  target.  In  this  respect,  recent 
increases in the  Danish energy consumption have 
contributed  to  widening  the  gap  towards  the  EU 
2020 target. 

Early school leaving (ESL) target: <10 % 

8.8 % (2017) 

44 

 
  
  
A. Overview Table 

(Less than 10 % school drop-out rates of the population 
aged 18-24)  

The  <10 %  target  has  been  reached  and  even 
surpassed.  The  school  drop-out  rate  of 
the 
population  aged  18-24  has  been  improving  in 
recent  years,  from12.5  %  in  2008  to  7.2  %  in 
2016, but increased again to 8.8 % in 2017. 

Tertiary education target: >40 %.  

48.8 % (2017) 

The  >40 %  target  has  been  reached  and  even 
surpassed. The share of the population aged 30-34 
which  has  successfully  completed  tertiary  studies 
has  increased  from  39.2 %  in  2008  to  48.8 %  in 
2017.  

Target  for  reducing  the  number  of  people  at  risk  of 
poverty  or  social  exclusion,  expressed  as  an  absolute 
number  of  people:  reduce  the  number  of  people  in 
households with low  work intensity by 22 000 towards 
2020.  

Between  2008  and  2016  the  number  of  people 
living in low-work intensity households increased 
with  88  000  (+25  %),  i.e.  the  gap  to  the  national 
Europe  2020  target  in  the  area  of  poverty  and 
social  exclusion  (reducing  the  number  of  persons 
living  in  low  work  intensity  households  with  22 
000 by 2020) is far from being closed. 

A better inclusion of people on the margins of the 
labour  market  is  crucial.  To  address  this,  the 
government  has  introduced  a  strategy  to  progress 
towards its ten goals on social  mobility, designed 
to  give  direction  and  greater  emphasis  to  social 
policy.  Denmark is  making progress on  some but 
lagging  behind  on  others,  such  as  increasing  the 
proportion  of  young  marginalised  people  starting 
an  upper  secondary  education  and  reducing  the 
number of homeless people (this rose  from 5 000 
in 2009 to 6 600 in 2017).  

45 

 
A. Overview Table 

46 

(1) The following categories are used to assess progress in implementing the 2017 country-specific recommendations (CSRs):  No progress: The Member State has not credibly announced nor adopted any measures to address the CSR. This category covers a number of typical situations, to be interpreted on a case-by-case basis taking into account country-specific conditions. They include the following:  no legal, administrative, or budgetary measures have been announced  o in the national reform programme, o in any other official communication to the national Parliament/relevant parliamentary committees or the European Commission,  o publicly (e.g. in a press statement or on the government's website);   no non-legislative acts have been presented by the governing or legislative body;    the Member State has taken initial steps in addressing the CSR, such as commissioning a study or setting up a study group to analyse possible measures to be taken (unless the CSR explicitly asks for orientations or exploratory actions). However, it has not proposed any clearly-specified measure(s) to address the CSR.  Limited progress: The Member State has:  announced certain measures but these address the CSR only to a limited extent; and/or  presented legislative acts in the governing or legislative body but these have not been adopted yet and substantial further, non-legislative work is needed before the CSR is implemented;   presented non-legislative acts, but has not followed these up with the implementation needed to address the CSR.  Some progress: The Member State has adopted measures   that partly address the CSR; and/or   that address the CSR, but a fair amount of work is still needed to address the CSR fully as only a few of the measures have been implemented. For instance, a measure or measures have been adopted by the national Parliament or by ministerial decision, but no implementing decisions are in place.  Substantial progress: The Member State has adopted measures that go a long way towards addressing the CSR and most of them have been implemented.  Full implementation: The Member State has implemented all measures needed to address the CSR appropriately.  
  
ANNEX B: COMMISSION DEBT SUSTAINABILITY ANALYSIS AND 

FISCAL RISKS 

47 

General Government debt projections under baseline, alternative scenarios and sensitivity tests2017201820192020202120222023202420252026202720282029Gross debt ratio36.133.332.230.528.726.824.722.520.317.915.513.110.8Changes in the ratio (-1+2+3)-1.8-2.8-1.0-1.7-1.8-2.0-2.1-2.1-2.3-2.3-2.4-2.4-2.3of which(1) Primary balance (1.1+1.2+1.3)2.21.20.81.51.61.82.02.12.22.32.32.42.3(1.1) Structural primary balance (1.1.1-1.1.2+1.1.3)2.31.61.81.71.81.92.02.12.22.32.32.42.3(1.1.1) Structural primary balance (bef. CoA)2.31.61.81.71.71.71.71.71.71.71.71.71.7(1.1.2) Cost of ageing0.0-0.2-0.3-0.3-0.3-0.4-0.4-0.3-0.2(1.1.3) Others (taxes and property incomes)0.00.0-0.10.00.10.20.20.30.3(1.2) Cyclical component-0.1-0.4-0.3-0.3-0.2-0.10.00.00.00.00.00.00.0(1.3) One-off and other temporary measures0.00.0-0.70.00.00.00.00.00.00.00.00.00.0(2) Snowball effect (2.1+2.2+2.3)-0.40.2-0.2-0.2-0.2-0.2-0.1-0.1-0.10.00.00.00.0(2.1) Interest expenditure1.11.00.90.90.80.80.80.70.70.60.50.50.4(2.2) Growth effect-0.8-0.4-0.6-0.5-0.5-0.4-0.4-0.3-0.3-0.3-0.2-0.2-0.2(2.3) Inflation effect-0.6-0.4-0.5-0.6-0.6-0.6-0.5-0.5-0.4-0.4-0.4-0.3-0.3(3) Stock-flow adjustments0.7-1.80.00.00.00.00.00.00.00.00.00.00.0Note: For further information, see the European Commission Fiscal Sustainability Report (FSR) 2018. b. For the medium-term, the risk category (low/medium/high) is based on the joint use of the S1 indicator and of the DSA results. The S1 indicator measures the fiscal adjustment required (cumulated over the 5 years following the forecast horizon and sustained thereafter) to bring the debt-to-GDP ratio to 60 % by 2033. The critical values used are 0 and 2.5 pps. of GDP. The DSA classification is based on the results of 5 deterministic scenarios (baseline, historical SPB, higher interest rate, lower GDP growth and negative shock on the SPB scenarios) and the stochastic projections. Different criteria are used such as the projected debt level, the debt path, the realism of fiscal assumptions, the probability of debt stabilisation, and the size of uncertainties. c. For the long-term, the risk category (low/medium/high) is based on the joint use of the S2 indicator and the DSA results. The S2 indicator measures the upfront and permanent fiscal adjustment required to stabilise the debt-to-GDP ratio over the infinite horizon, including the costs of ageing. The critical values used are 2 and 6 pps. of GDP. The DSA results are used to further qualify the long-term risk classification, in particular in cases when debt vulnerabilities are identified (a medium / high DSA risk category). [2]Thechartspresentaseriesofsensitivitytestsaroundthebaselinescenario,aswellasalternativepolicyscenarios,inparticular:thehistoricalstructuralprimarybalance(SPB)scenario(wheretheSPBissetatitshistoricalaverage),theStabilityandGrowthPact(SGP)scenario(wherefiscalpolicyisassumedtoevolveinlinewiththemainprovisionsoftheSGP),ahigherinterestratescenario(+1pp.comparedtothebaseline),alowerGDPgrowthscenario(-0.5pp.comparedtothebaseline)andanegativeshockontheSPB(calibratedonthebasisoftheforecastedchange).Anadversecombinedscenarioandenhancedsensitivitytests(ontheinterestrateandgrowth)arealsoincluded,aswellasstochasticprojections. Detailed information on the design of these projections can be found in the FSR 2018.DK - Debt projections baseline scenario[1]Thefirsttablepresentsthebaselineno-fiscalpolicychangescenarioprojections.Itshowstheprojectedgovernmentdebtdynamicsanditsdecompositionbetweentheprimarybalance,snowballeffectsandstock-flowadjustments.Snowballeffectsmeasurethenetimpactofthecounteractingeffectsofinterestrates,inflation,realGDPgrowth(andexchangerates in some countries). Stock-flow adjustments include differences in cash and accrual accounting, net accumulation of assets, as well as valuation and other residual effects.[3] The second table presents the overall fiscal risk classification over the short, medium and long-term. a. For the short-term, the risk category (low/high) is based on the S0 indicator. S0 is an early-detection indicator of fiscal stress in the upcoming year, based on 25 fiscal and financial-competitiveness variables that have proven in the past to be leading indicators of fiscal stress. The critical threshold beyond which fiscal distress is signalled is 0.46. 0510152025303540455020162017201820192020202120222023202420252026202720282029Debt as % of GDP -DKBaselineEnhanced lower GDP growth scenarioAdverse combined scenarioEnhanced higher interest rate scenario0102030405020162017201820192020202120222023(% of GDP)Stochastic debt projections 2019-2023 -DKp10_p20p20_p40p40_p60p60_p80p80_p90p50Baseline0510152025303540455020162017201820192020202120222023202420252026202720282029Debt as % of GDP -DKBaselineHistorical SPB scenarioSGP scenario0510152025303540455020162017201820192020202120222023202420252026202720282029Debt as % of GDP -DKBaselineHigher interest rate scenarioNegative shock on the SPBLower GDP growth scenarioBaselineHistorical SPBLower GDP growthHigher interest rateNegative shock on SPBStochastic projectionsRisk categoryLOWLOWLOWLOWLOWLOWDebt level (2029)10.86.512.211.711.9Debt peak year20182018201820182018Percentile rank28.0%23.0%Probability debt higher8.1%Dif. between percentiles17.1LOWLong termDSALOWDebt sustainability analysis (detail)Medium termLOWLOWShort termLOW(S0 = 0.1)(S1 = -5.1)S2LOW(S2 = -0.5)S1 
 
ANNEX C: STANDARD TABLES 

Table C.1: 

Financial market indicators 

(1) Latest data Q3 2018. Includes not only banks but all monetary financial institutions excluding central banks. 
(2) Latest data Q2 2018. 
(3) Quarterly values are annualised. 
* Measured in basis points. 
Source: European Commission (long-term interest rates); World Bank (gross external debt); Eurostat (private debt); ECB (all 
other indicators) 

48 

201320142015201620172018Total assets of the banking sector (% of GDP)1)404.6407.3377.1383.6370.4360.7Share of assets of the five largest banks (% of total assets)68.468.167.868.365.7-Foreign ownership of banking system (% of total assets)2)12.912.212.512.37.06.9Financial soundness indicators:2)              - non-performing loans (% of total loans)-5.13.93.32.52.5              - capital adequacy ratio (%)19.218.219.820.722.121.7              - return on equity (%)3)4.44.76.89.710.89.5Bank loans to the private sector (year-on-year % change)1)0.60.21.01.20.83.0Lending for house purchase (year-on-year % change)1)-0.80.41.11.51.21.3Loan to deposit ratio2)-192.9213.8211.0228.7229.2Central Bank liquidity as % of liabilities1)0.91.00.10.10.10.1Private debt (% of GDP)216.1214.0211.4208.0200.7-Gross external debt (% of GDP)2) - public17.217.815.113.012.511.0    - private36.639.242.141.738.938.6Long-term interest rate spread versus Bund (basis points)*17.616.319.423.115.96.0Credit default swap spreads for sovereign securities (5-year)*17.616.012.715.510.96.8 
 
 
 
 
 
 
 
 
C. Standard Tables 

Table C.2: 

Headline Social Scoreboard indicators 

(1) People at risk of poverty or social exclusion (AROPE): individuals who are at risk of poverty (AROP) and/or suffering from 
severe material deprivation (SMD) and/or living in households with zero or very low work intensity (LWI).       
(2) Unemployed persons are all those who were not employed but had actively sought work and were ready to begin 
working immediately or within two weeks.       
(3) Long-term unemployed are people who have been unemployed for at least 12 months.       
(4) Gross disposable household income is defined in unadjusted terms, according to the draft Joint Employment Report 2019.       
(5) Reduction in percentage of the risk of poverty rate, due to social transfers (calculated comparing at-risk-of poverty rates 
before social transfers with those after transfers; pensions are not considered as social transfers in the calculation).       
(6) Average of first three quarters of 2018 for the employment rate, unemployment rate and gender employment gap. Data 
for unemployment rate is seasonally adjusted.       
Source: Eurostat 

49 

201320142015201620172018Total assets of the banking sector (% of GDP)1)404.6407.3377.1383.6370.4360.7Share of assets of the five largest banks (% of total assets)68.468.167.868.365.7-Foreign ownership of banking system (% of total assets)2)12.912.212.512.37.06.9Financial soundness indicators:2)              - non-performing loans (% of total loans)-5.13.93.32.52.5              - capital adequacy ratio (%)19.218.219.820.722.121.7              - return on equity (%)3)4.44.76.89.710.89.5Bank loans to the private sector (year-on-year % change)1)0.60.21.01.20.83.0Lending for house purchase (year-on-year % change)1)-0.80.41.11.51.21.3Loan to deposit ratio2)-192.9213.8211.0228.7229.2Central Bank liquidity as % of liabilities1)0.91.00.10.10.10.1Private debt (% of GDP)216.1214.0211.4208.0200.7-Gross external debt (% of GDP)2) - public17.217.815.113.012.511.0    - private36.639.242.141.738.938.6Long-term interest rate spread versus Bund (basis points)*17.616.319.423.115.96.0Credit default swap spreads for sovereign securities (5-year)*17.616.012.715.510.96.8 
 
 
 
 
 
 
C. Standard Tables 

Table C.3: 

Labour market and education indicators 

* Non-scoreboard indicator       
(1) Difference between the average gross hourly earnings of male paid employees and of female paid employees as a 
percentage of average gross hourly earnings of male paid employees. It is defined as "unadjusted", as it does not correct for 
the distribution of individual characteristics (and thus gives an overall picture of gender inequalities in terms of pay). All 
employees working in firms with ten or more employees, without restrictions for age and hours worked, are included.       
(2) PISA (OECD) results for low achievement in mathematics for 15 year-olds.       
(3) Impact of socio-economic and cultural status on PISA (OECD) scores. Values for 2012 and 2015 refer respectively to 
mathematics and science.       
(4) Average of first three quarters of 2018. Data for youth unemployment rate is seasonally adjusted.       
Source: Eurostat, OECD 

50 

Labour market indicators201320142015201620172018 4Activity rate (15-64)78.178.178.580.078.8:Employment in current job by durationFrom 0 to 11 months19.119.819.421.620.9:From 12 to 23 months10.811.613.012.813.5:From 24 to 59 months17.116.717.518.018.8:60 months or over52.551.449.947.546.8:Employment growth* (% change from previous year)0.00.91.41.51.71.9Employment rate of women(% of female population aged 20-64)72.472.272.674.073.774.8Employment rate of men (% of male population aged 20-64)78.779.580.280.780.281.3Employment rate of older workers* (% of population aged 55-64)61.763.264.767.868.970.4Part-time employment* (% of total employment, aged 15-64)24.724.624.726.425.324.6Fixed-term employment* (% of employees with a fixed term contract, aged 15-64)8.88.68.713.512.911.3Participation in activation labour market policies(per 100 persons wanting to work)45.845.454.543.9::Transition rate from temporary to permanent employment(3-year average)26.032.239.244.841.8:Youth unemployment rate (% active population aged 15-24)13.012.610.812.011.09.3Gender gap in part-time employment20.519.819.120.119.119.1Gender pay gap1 (in undadjusted form)16.516.015.115.014.7:Education and training indicators201320142015201620172018Adult participation in learning(% of people aged 25-64 participating in education and  training)31.431.931.327.726.8:Underachievement in education2::13.6:::Tertiary educational attainment (% of population aged 30-34 having successfully completed tertiary education)43.444.947.647.748.8:Variation in performance explained by students' socio-economic status3::10.4::: 
 
 
 
 
 
 
C. Standard Tables 

Table C.4: 

Social inclusion and health indicators 

* Non-scoreboard indicator       
(1) At-risk-of-poverty rate (AROP): proportion of people with an equivalised disposable income below 60 % of the national 
equivalised median income.        
(2) Proportion of people who experience at least four of the following forms of deprivation: not being able to afford to i) pay 
their rent or utility bills, ii) keep their home adequately warm, iii) face unexpected expenses, iv) eat meat, fish or a protein 
equivalent every second day, v) enjoy a week of holiday away from home once a year, vi) have a car, vii) have a washing 
machine, viii) have a colour TV, or ix) have a telephone.       
(3) Percentage of total population living in overcrowded dwellings and exhibiting housing deprivation.       
(4) People living in households with very low work intensity: proportion of people aged 0-59 living in households where the 
adults (excluding dependent children) worked less than 20 % of their total work-time potential in the previous 12 months.       
(5) Ratio of the median individual gross pensions of people aged 65-74 relative to the median individual gross earnings of 
people aged 50-59.       
(6) Fixed broadband take up (33%), mobile broadband take up (22%), speed (33%) and affordability (11%), from the Digital 
Scoreboard.       
Source: Eurostat, OECD 

51 

201220132014201520162017Expenditure on social protection benefits* (% of GDP)Sickness/healthcare6.56.46.36.36.3:Disability4.14.14.14.14.0:Old age and survivors12.713.314.013.613.0:Family/children3.73.63.53.53.5:Unemployment1.91.81.61.51.4:Housing0.70.70.70.70.7:Social exclusion n.e.c.1.21.31.31.51.5:Total30.931.331.631.130.3:of which: means-tested benefits11.011.211.311.311.3:General government expenditure by function (% of GDP, COFOG)Social protection24.624.524.023.623.422.7Health8.78.58.68.68.68.5Education7.06.97.17.06.96.6Out-of-pocket expenditure on healthcare (% of total health expenditure)14.213.813.813.713.7:Children at risk of poverty or social exclusion (% of people aged 0-17)*14.915.414.515.713.914.5At-risk-of-poverty  rate1 (% of total population)12.011.912.112.211.912.4In-work at-risk-of-poverty rate (% of persons employed)5.25.54.95.55.35.3Severe material deprivation rate2  (% of total population)2.73.63.23.72.63.1Severe housing deprivation rate3, by tenure statusOwner, with mortgage or loan1.20.91.11.50.50.9Tenant, rent at market price5.04.84.75.13.66.0Proportion of people living in low work intensity households4 (% of people aged 0-59)10.211.912.211.610.710.0Poverty thresholds, expressed in national currency at constant prices*108815107205108491109962110964113538Healthy life years (at the age of 65)Females12.912.712.811.911.9:Males10.611.611.011.011.5:Aggregate replacement ratio for pensions5 (at the age of 65)0.40.40.50.40.50.5Connectivity dimension of the Digital Economy and Society Inedex (DESI)6::66.471.172.476.4GINI coefficient before taxes and transfers*50.649.951.450.751.250.4GINI coefficient after taxes and transfers*28.126.827.727.427.727.6 
 
 
 
 
 
C. Standard Tables 

Table C.5: 

Product market performance and policy indicators 

(1) Value added in constant prices divided by the number of persons employed.       
(2) Compensation of employees in current prices divided by value added in constant prices.       
(3) The methodologies, including the assumptions, for this indicator are shown in detail here: 
http://www.doingbusiness.org/methodology.        
(4) Average of the answer to question Q7B_a. "[Bank loan]: If you applied and tried to negotiate for this type of financing 
over the past six months, what was the outcome?". Answers were codified as follows: zero if received everything, one if 
received 75% and above, two if received below 75%, three if refused or rejected and treated as missing values if the 
application is still pending or don't know.       
(5) Percentage population aged 15-64 having completed tertiary education.       
(6) Percentage population aged 20-24 having attained at least upper secondary education.       
(7) Index: 0 = not regulated; 6 = most regulated. The methodologies of the OECD product market regulation indicators are 
shown in detail here: http://www.oecd.org/competition/reform/indicatorsofproductmarketregulationhomepage.htm       
(8) Aggregate OECD indicators of regulation in energy, transport and communications (ETCR).       
Source: European Commission; World Bank — Doing Business (for enforcing contracts and time to start a business); OECD (for 
the product market regulation indicators); SAFE (for outcome of SMEs' applications for bank loans). 

52 

Performance indicators201220132014201520162017Labour productivity per person1 growth (t/t-1) in %Labour productivity growth in industry2,950,41-0,96-1,754,080,15Labour productivity growth in construction3,633,620,817,55-0,302,69Labour productivity growth in market services-0,581,900,341,43-0,02-0,10Unit Labour Cost (ULC) index2 growth (t/t-1) in %ULC growth in industry-0,881,153,163,97-1,401,37ULC growth in construction-1,47-2,981,22-4,073,94-0,41ULC growth in market services1,93-0,821,010,421,522,06Business environment201220132014201520162017Time needed to enforce contracts3 (days)410515485485485485Time needed to start a business3 (days)6,06,06,03,53,53,5Outcome of applications by SMEs for bank loans4:0,700,440,980,790,48Research and innovation201220132014201520162017R&D intensity2,982,972,913,063,123,06General government expenditure on education as % of GDP7,006,907,107,006,906,60Employed people with tertiary education and/or people employed in science and technology as % of total employment474848484950Population having completed tertiary education5292930313132Young people with upper secondary education6727273747575Trade balance of high technology products as % of GDP-0,28-0,10-0,040,190,10-0,24Product and service markets and competition200320082013OECD product market regulation (PMR)7, overall1,481,351,22OECD PMR7, retail3,001,831,69OECD PMR7, professional services0,870,780,82OECD PMR7, network industries82,051,701,61 
 
 
 
  
 
 
C. Standard Tables 

Table C.6:  Green growth 

All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2010 prices)  
          Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR)  
          Carbon intensity: greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR)  
          Resource intensity: domestic material consumption (in kg) divided by GDP (in EUR)  
          Waste intensity: waste (in kg) divided by GDP (in EUR)  
Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP    
Weighting of energy in HICP: the proportion of 'energy' items in the consumption basket used for the construction of the HICP  
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual % 
change)  
Real unit energy cost: real energy costs as % of total value added for the economy  
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in 2010 EUR)   
Real unit energy costs for manufacturing industry excluding refining : real costs as % of value added for  manufacturing 
sectors  
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP  
Electricity and gas prices for medium-sized industrial users: consumption band 500–20 00MWh and 10 000–100 000 GJ; figures 
excl. VAT.  
Recycling rate of municipal waste: ratio of recycled and composted municipal waste to total municipal waste  
Public R&D for energy or for the environment: government spending on R&D for these categories as % of GDP  
Proportion of GHG emissions covered by EU emissions trading system (ETS) (excluding aviation): based on GHG emissions  
(excl land use, land use change and forestry) as reported by Member States to the European Environment Agency.  
Transport energy intensity: final energy consumption of transport activity (kgoe) divided by transport industry gross value 
added (in 2010 EUR)  
Transport carbon intensity: GHG emissions in transport activity divided by gross value added of the transport industry  
Energy import dependency: net energy imports divided by gross inland energy consumption incl. consumption of 
international bunker fuels  
Aggregated supplier concentration index:  covers oil, gas and coal. Smaller values indicate larger diversification and hence 
lower risk.  
Diversification of the energy mix: Herfindahl index covering natural gas, total petrol products, nuclear heat, renewable 
energies and solid fuels  
* European Commission and European Environment Agency  
Source: European Commission and European Environment Agency (Share of GHG emissions covered by ETS); European 
Commission (Environmental taxes over labour taxes and GDP); Eurostat (all other indicators) 

53 

Green growth performance201220132014201520162017MacroeconomicEnergy intensity kgoe / €0.070.070.070.070.07-Carbon intensity kg / €0.210.220.200.190.19-Resource intensity (reciprocal of resource productivity)kg / €0.530.490.490.490.490.50Waste intensity kg / €0.07-0.08-0.08-Energy balance of trade % GDP0.80.30.00.00.0-0.1Weighting of energy in HICP%11.410.310.611.310.111.1Difference between energy price change and inflation %-0.70.80.7-5.9-2.2-1.5Real unit of energy cost% of value added11.110.99.59.810.1-Ratio of environmental taxes to labour taxesratio0.170.170.160.170.17-Environmental taxes% GDP4.04.14.04.04.0-Sectoral Industry energy intensity kgoe / € 0.060.050.050.050.05-Real unit energy cost for manufacturing industry excl. refining% of value added5.45.54.94.94.9-Share of energy-intensive industries in the economy% GDP8.07.37.27.16.97.0Electricity prices for medium-sized industrial users€ / kWh0.100.100.100.090.090.08Gas prices for medium-sized industrial users€ / kWh0.040.040.040.040.030.03Public R&D for energy % GDP0.050.050.040.030.020.02Public R&D for environmental protection% GDP0.020.020.020.020.020.01Municipal waste recycling rate%42.143.245.146.346.946.3Share of GHG emissions covered by ETS*%34.139.136.032.734.2-Transport energy intensitykgoe / €0.370.330.360.370.38-Transport carbon intensitykg / €0.950.850.910.940.97-Security of energy supplyEnergy import dependency%-2.212.312.413.413.9-Aggregated supplier concentration indexHHI5.35.77.44.85.8-Diversification of energy mixHHI0.260.260.270.270.27- 
 
 
 
ANNEX D: INVESTMENT GUIDANCE ON COHESION POLICY 

FUNDING 2021-2027 FOR DENMARK (33) 

Building  on  the  Commission  proposal  for  the  next  Multi-Annual  Financial  Framework  for  the  period 
2021-2027  of  2  May  2018  (COM  (2018)  321),  this  Annex  D  presents  the   preliminary  Commission 
services views on priority investment areas and framework conditions for effective delivery for the 2021-
2027 Cohesion Policy. These priority investment areas are derived from the broader context of investment 
bottlenecks,  investment  needs  and  regional  disparities  assessed  in  the  report.  This  Annex  provides  the 
basis for a dialogue between Denmark and the Commission services in view of the programming of the 
cohesion policy funds (European Regional Development Fund and European Social Fund Plus). (34) 

Policy Objective 1: A Smarter Europe – Innovative and smart industrial transformation 

Overall,  Denmark  is  an  Innovation  Leader,  but  private  research  and  development  investment  is 
increasingly concentrated on a small number of large businesses. This means that the majority of Danish 
small and medium-sized enterprises are not sufficiently preparing for the future through innovations in 
products  and  processes.  Investment  needs (35)have  been  therefore  identified  to  enhance  research  and 
innovation  capacities  and  the  uptake  of  advanced  technologies  in  small  and  medium-sized 
enterprises, and in particular to: 
•  promote  cooperation  between  small  and  medium-sized  enterprises  and  academia  and  encourage 
universities/research  centres  to  be  actively  involved  in  projects,  whilst  developing  entrepreneurial 
ecosystems; cooperation could involve stakeholders in other regions, and also across borders notably in 
the framework of the EU Strategy for Baltic Sea Region; 
 • invest in firms' capacity to internalise external knowledge and new technologies, strengthen market-
oriented research and development, including through the establishment of Living Labs, and  facilitate 
innovation uptake in small and medium-sized enterprises, in order to allow them to participate in global 
value chains;  
•  strengthen  effective  connectivity  between  actors  in  the  innovation  ecosystem  in  order  to  facilitate  a 
quicker commercialisation of research in the high growth smart specialisation areas; 
• increase the diffusion of the latest digital developments and other key enabling technologies through 
the  network  of  digital  innovation  hubs  via  science/business  collaboration  to  allow  Danish  small  and 
medium-sized enterprises to exploit new technologies to generate growth. 

Among Danish small and medium-sized enterprises, there are relatively few with a high growth rate, and 
employment in fast growing firms is below the European average. Investment needs have therefore been 
identified  to  enhance  growth  and  competitiveness  of  small  and  medium-sized  enterprises,  which 
could boost productivity growth, and in particular to: 
• promote the creation of, and broaden the scope, of innovative firms among  small and  medium-sized 
enterprises (foster growth of start-ups/scale-ups/accelerators) and enable them to sufficiently prepare for 
the  future  through  innovations  in  products  and  processes  in  the  smart  specialisation  areas  with  the 
highest growth potential; 
•  facilitate  growth  and  internationalisation  of  small  and  medium-sized  enterprises  through  the  use  of 
networks  and  clusters  on  a  regional,  interregional  and  international  level.  The  partnerships  and 
knowledge  sharing  can  be  the  basis  for  further  innovations  and  co-operation,  in  line  with  the  EU 
Strategy for the Baltic Sea Region. This could open up potential for new exports, high tech sales, and 
boost employment creation. 

The  improving economic situation  following the financial  and economic crisis  has led to shortages of 
skilled labour, and firms are facing challenges in recruiting certain types of workers. There is room to 
improve the matching of supply and demand of relevant digital skills.  Investment needs have therefore 
been  identified  for  the  development  of  skills  for  smart  specialisation,  industrial  transition  and 
entrepreneurship, in synergy with lifelong learning actions under Policy Objective 4; and in particular 

(34)  This Annex is to be considered in conjunction with the EC Proposal for a Regulation of the European Parliament and of the 
Council on the European Regional Development Fund and on the Cohesion Fund COM(2018) 372 and in the EC Proposal for a 
Regulation of the European Parliament and of the Council on the European Social Fund Plus COM(2018) 382 and in particular 
the requirements for thematic concentration and urban earmarking outlined in these proposals. 

(35)  The intensity of needs is classified in three categories in a descending order - high priority needs, priority needs, needs. 

54 

 
 
 
                                                           
D. Investment Guidance on Cohesion Policy Funding 2021-2027 for Denmark 

to: 
• specific training and reskilling for smart specialisation areas at all levels within firms and building the 
necessary  administrative  capacity,  with  a  particular  attention  to  digital  skills  and  the  need  to  address 
industrial transition; 
• trainings on managing innovations to small and medium-sized enterprises, research institutions and to 
entities that provide support and advisory services; 
• strengthening the integration of education and training providers including universities and vocational 
education and training centres within national and regional innovation, technology diffusion and skills 
development ecosystems; 
• support cooperation on promoting mobility of researchers across borders to better utilise the available 
human capital. 

Policy Objective 4: A more social Europe – Implementing the European Pillar of Social Rights 

Companies  report  labour  shortages  while  some  vulnerable  groups  remain  on  the  margin  of  the  labour 
market.  In  a  context  of  a  well-functioning  education  system,  vocational  education  and  training  needs 
strengthening. Investments needs have therefore been identified to improve the quality, effectiveness 
and labour market relevance of education and training, to support acquisition of key competences 
including  digital  skills;  to  promote  lifelong  learning,  notably  flexible  upskilling  and  reskilling, 
taking  into  account  digital  skills,  better  anticipating  change  and  new  skills  requirements, 
facilitating career transitions and promoting professional mobility, and in particular to: 
• promote vocational education and training as a quality career pathway and ensure its attractiveness to 
students; 
• build vocational education  and training providers’ capacity to respond to  the needs of employers by 
promoting innovation and entrepreneurship; 
• develop and implement life-long learning strategies, in cooperation with social partners, civil society 
and other stakeholders; 
• upgrade basic skills of the adult population, including migrants, and create new opportunities for low-
skilled adults. 

An  important  share  of  youth  with  migrant  background  trail  significantly  behind  native  born  in 
educational outcomes. Investment needs have therefore been identified to promote equal access to, and 
completion of, quality and inclusive education and training, from early childhood education and 
care through general and vocational education and training, and to tertiary level, as well as adult 
education and learning, in particular to: 
• improve basic skill attainment of all students, in particular those from disadvantaged groups; 
• support targeted outreach, in particular to prevent early school leaving. 

Factors for effective delivery of Cohesion policy 

• strengthen innovation performance and foster productivity growth by identifying smart specialisation 
areas on the basis of national and regional needs and potential. In Denmark, this applies also to the new 
national business support strategy; 
• broader use of financial instruments and/or contributions to a Danish compartment under InvestEU for 
revenue-generating and cost-saving activities; 
• adequate participation of social partners, civil society and other relevant stakeholders in the delivery of 
the policy objectives. 

55 

 
 
 
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