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Denmark: 2012 Article IV Consultation

2013; International Monetary Fund; Volume: 13; Issue: 22 Linguagem: Inglês

10.5089/9781475529036.002

2227-8907

International Monetary Fund,

Regional Development and Policy

Denmark's recovery from the global financial crisis is faltering and risks are weighted to the downside given the close trade and financial links to the euro area and its peg to the euro.However, growth is expected to resume in late 2012 and gain momentum in 2013.In this context, the authorities should: Manage the domestic impact of international capital flows arising from the peg to the euro by taking the necessary foreign exchange market intervention and policy interest rate adjustments; Allow automatic stabilizers to operate fully and prepare contingency plans to support the economy through discretionary fiscal policy in the event of a weakerthan-expected economy or slower-than-expected spending on investment or spending by municipal governments; Undertake reforms to raise potential growth including through further measures to boost competition, contain the size of government, and limit tax disincentives to work and the accumulation of human capital; Strengthen the financial sector through more robust capital and liquidity buffers, risk-based deposit insurance premia, and gradually phase-out deferred amortization mortgage loans; and  Remain engaged in the development of the euro area banking union given that a well-functioning banking union would enhance the EU single market.Denmark is well-positioned to address these policy challenges.Gross public debt is about 50 percent of GDP and its triple-A credit rating supports market access on favorable terms.