Stockholm (Ekonamik) – Along with a handful of smaller European countries such as Austria and the Netherlands, Denmark is one nation that appears to have weathered the COVID-19 crisis relatively well (comparatively speaking). The small Nordic country grasped the dangers of the crisis early, shutting down society and its economy weeks before most other European countries. Consequently, it was among the first who were able to reopen their economies in late May. However, the country is now marred by high unemployment and a marked fall in GDP, with the economy not expected to pick up to pre-COVID levels before next year, at the earliest. In addition, the nature of Denmark’s very open economy means that despite the country’s success in reopening society quickly, its dependence on exports to surrounding countries makes it more vulnerable to the effects of a global recession. How has Denmark weathered the crisis so far, and what, if any, lessons can be drawn?
A Hard Toll
As elsewhere, the Corona crisis hit the Danish economy hard, shrinking it by 1.9% in Q1 2020, according to figures from Danmarks Statistik. “This is a sharp decline in a single quarter, but well in line with our expectations,” Las Olsen, chief economist at Danske Bank, wrote in a note in May. “After all, we closed down large parts of the economy, and considering that one could almost say we got off cheap.” However, this was only a taste of what awaited in Q2, which saw a steep fall in GDP of 5.3 per cent. “The shutdown began in March, while the economy was functioning pretty well for the first two months of the year. Here in the middle of the second quarter, we are only beginning to reopen the economy, so for the quarter as a whole it looks rather bleak,” Mr Olsen wrote. Making things even more uncertain, GDP estimates under the crisis are influenced by more extraordinary factors than usual due to the deferment of various taxes and fees, among other issues.
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