kredietrisico-beperken-kredietverzekering
Denmark

Denmark

Population 5.8 million
GDP 59,770 US$
A2
Country risk assessment
A1
Business Climate
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Synthesis

major macro economic indicators

  2018 2019 2020 (e) 2021 (f)
GDP growth (%) 2.0 2.1 -2.1 2.8
Inflation (yearly average, %) 0.8 0.8 0.4 1.6
Budget balance (% GDP) 0.7 3.8 -1.1 -2.8
Current account balance (% GDP) 7.3 8.8 8.2 7.8
Public debt (% GDP) 34.0 33.6 42.1 42.7

(e): Estimate (f): Forecast

STRENGTHS

  • World’s largest shipping operator (2019)
  • Almost energy self-sufficient (oil and gas in the North Sea and Greenland)
  • Niche industries with cyclically non-sensitive export goods (e.g. pharmaceutics and wind turbines)
  • Well managed public finances
  • Large current account surplus
  • Krone pegged to the euro

WEAKNESSES

  • Small open economy sensitive to external demand, especially from the UK
  • Government instability related to the fragmentation of parliament (threshold to enter the parliament is only 2% for a party; 4 extra seats for Faroer Islands and Greenland)
  • Very high household debt (258% of disposable income, 2020)
  • Public sector constitutes a significant part of the country’s employment (26% of employees at mid-2019)
  • High but mostly private external debt (143% of GDP, 2019)
  • Strengthening independence movement in Greenland

Risk assessment

From mild recession to moderate recovery

For 2021, a moderate recovery is expected for the Danish economy. The country had a bumpy start into the year. In mid-December 2020, a third-wave hit the country forced the country into a hard-lockdown. All non-essential shops and services had to close, as well as schools for a while and strong gathering limitations were implemented. From mid-April, the lockdown was progressively lifted, which was relatively early in comparison with Western Europe. The main device in the Danish corona policy is the corona-pass that allows its holder to visit restaurants for instance. Fully vaccinated people, around 45% of the adult population as of mid-July, have a permanent corona-pass. Because of the lockdown, Danish economic activity decreased noticeably in Q1 2021. However, this fall was cushioned thanks to a less pronounced decrease in consumption and a high global demand for Danish machinery. From late spring and into the summer, a recovery of the private consumption has supported a dynamic economic recovery. This should be reinforced by a refund of overpaid property tax for around 800,000 homeowners in Q1, a strong decrease in the unemployment rate and the fact that again most Danes will spend their summer holiday at home (Denmark has a negative structural tourism balance). Furthermore, the global demand for Danish products, especially wind turbines, should remain high, as the overall pressure to increase environmental friendly energy production becomes imminent in the EU.
The government support of last year should keep on in 2021. The furlough scheme was reintroduced in late 2020 until the end of the restrictions in July 2021. Furthermore the parliament agreed on a summer package of DKK 1.65 billion (0.07% of the GDP), which should boost tourism, transportation and the event industry. Loan and guarantee schemes will continue until the end of September 2021. Additionally, the agreement on renovation in the social housing sector and the postponement of the increase of the energy tax should further encourage the economic recovery. The central bank of Denmark had increased its policy rate by 15 basis points to -0.6% in spring 2020 to hold the Danish krone in the peg with the euro (its main target). The monetary policymakers should leave this rate unchanged in 2021, but will probably extend their extraordinary lending facilities to mirror the already announced further expansionary measures of the ECB in 2021. 

 

Still strong current account surplus

The current account surplus should remain high. One reason for this is the robust export sector that is in part concentrated on pharmaceuticals (16% of all exports) and agricultural/food products (13%). The demand for Danish machinery will remain elevated. The general government deficit remained subdued in 2020, as only around 10% of the government’s relief package for business was used. For 2021 however, the budget balance will widen, due to an increase in public expenditures, as the second lockdown was more severe than the first one, and a decrease in revenues. However, the deficit should not breach the Maastricht-target of 3% and the public debt level will remain muted.

 

Popular social-democratic government with a conservative policy

Since June 2019, Prime Minister Mette Frederiksen from the Social Democratic Party (SD) is leading a minority government with the support of the “red-block”, the Social Liberal Party, the Socialists People’s Party, the Red-Green Alliance and three single parties from Greenland and the Faroes Islands. Since spring 2020, support numbers in polls for the SD are very high compared to the other parties. The early and strong response of the government towards COVID-19 was one reason for that, another one being Denmark’s participation in a group of countries that promotes austerity policy within the EU, as well as the partnership with Austria to manage the vaccine-supply for their countries without the EU. Furthermore, Frederiksen is implementing a popular but very conservative migration policy with the creation of Danish refugee camps in Africa, so that the asylum procedures can take place abroad and not in Denmark. The only negative incident was Frederiksen’s illegal order to kill all living mink in Denmark, as a prophylactic measure to avoid a further spread of a new mutation of the COVID-19 virus. The minister for agriculture had to step down from his office. The government survived and is expected to remain in office until the next regular election in 2023.

 

Last updated: August 2021

Payment

Denmark is in the process of becoming a cashless society. Bank transfers are the most commonly used means of payment. All major Danish banks use the SWIFT network, as it is a rapid and efficient solution for the payment of domestic and international transactions. Denmark has also implemented the Single Euro Payments Area (SEPA) in order to simplify bank transfers in euros.

Cheques and bills of exchange are now seldom used in Denmark. Both are seen as an acknowledgement of debt.

Unpaid bills of exchange and cheques that have been accepted are legally enforceable instruments that mean that creditors do not need to obtain a court judgement. In cases such as these, a judge-bailiff (Fogedret) is appointed to oversee the enforcement of the attachment. Prior to this, the debtor is summonsed to declare his financial situation, in order to establish his ability to repay the debt. It is a criminal offence to make a false statement of insolvency.

Debt collection

Amicable phase

The amicable phase begins with the creditor, or his legal counsel (e.g. attorney, licenced collection agency, etc.), sending the debtor a final demand for payment by post, in which he is given 10 days to settle the principal amount, plus any penalties for interest provided for in the initial agreement.

Once the 10 days from the date of the letter of demand have expired, the creditor’s legal counsel can charge the debtor for out of court collection costs (based on an official tariff) and present the debtor with a debt collection letter which gives them 10 further days to pay. If this payment deadline is not respected, the debtor can be sent a warning notice which sets out the date and time of a visit. A third reminder can be sent and calls can be made.

When no specific interest rate clauses have been agreed by the parties (maximum of 2% per month), the rate of interest applicable to commercial agreements contracted after August 1, 2002 is either the Danish National Bank’s benchmark, or the lending rate (udlånsrente) in force on January 1 or July 1 of the year in question, plus an additional 8%.

 

Legal proceedings
Fast-track proceedings

Since January 1, 2008, overdue payments which do not exceed DKK 50,000 or €6,723 and are uncontested are handled via a simplified collection procedure (forenklet inkassoprocedure), whereby the creditor submits an injunction form directly to the judge-bailiff for service on the debtor. If there is no response within 14 days, an enforcement order is issued.

 

Ordinary proceedings

If a debtor fails to respond to a demand for payment, or if the dispute is not severe, creditors can obtain a judgement following an adversarial hearing or a judgement by default ordering the debtor to pay. This usually takes three months.

In the case of a judgement by default, the debtor can be ordered to pay the principal amount plus interest and expenses (including court fees and, where applicable, a contribution to the creditor’s legal costs) within 14 days.

All cases, whatever the size of the claim and level of complexity, disputed or not, are heard by the court of first instance (Byret). The court is presided over by a panel of three judges, or one judge assisted by experts, who consider both written and orally-presented evidence.

Appeals on claims which exceed DKK 10,000 are heard by one of two regional courts − either the Vestre Landsret in Viborg (for the Jutland area) or the Østre Landsret in Copenhagen (for the rest of the country). Exceptional cases that involve questions of principle can be submitted directly to the appropriate regional court.

These proceedings involve a series of preliminary hearings, during which the parties present written submissions and evidence, and a plenary hearing, in which the court hears witness testimonies and arguments from both parties. Court costs depend on the value of the claim. The losing party generally bears the legal costs.

Denmark only has commercial courts in the Copenhagen area. These comprise a maritime and a commercial court (Sø-og Handelsretten) which are presided over by a panel of professional and non-professional judges. These judges are competent to hear cases involving commercial and maritime disputes, competition law, insolvency proceedings and cases involving international trade.

Enforcement of a legal decision

Domestic judgements become enforceable when all appeal venues have been exhausted. If the debtor fails to comply with the judgment within two weeks, the creditor can have it enforced through the bailiff’s Court. Enforcement can take the form of a payment arrangement, or a seizure of the debtor’s assets. Payment plans are normally agreed in court and the debtor’s assets that can be seized are normally agreed at the same time. Courts normally accept payment plans of up to ten to twelve months depending on the amount.

As concerns foreign awards, the scenario can be more difficult if the decision is issued by an EU member, as Denmark does not adhere to the EU regulations on European Payment Order procedures. Decisions issued by non-EU members can be recognised and enforced, provided that the issuing country is part of a bilateral or multilateral agreement with Denmark.

Insolvency proceedings

Out-of-court proceedings

Non-judicial restructuring can take place through formal composition agreements, whereby the debts owed to the creditors are acknowledged and payment instalment agreed upon, without having recourse to a judge. Nevertheless, the efficiency of the Danish court system means that out-of-court proceedings tend to be used as informal negotiation tools.

 

Restructuring proceedings

Restructuring procedures are based on decisions handed down by the bankruptcy court. The court examines the possibility of a compulsory composition and/or a business transfer. These proceedings can be initiated by the debtor, in cases of insolvency, or by the creditor (but only with respect to legal entities). The court then appoints a restructuring administrator. The debtor maintains control of his assets during the procedure but is not allowed to enter into transactions of material significance without the consent of the restructuring administrator. The outcome of the procedure depends on the administrator’s proposal.

 

Liquidation

Liquidation procedures are based on bankruptcy orders issued by the Court, either at the request of the debtor or a creditor. The debtor must be insolvent. The Court appoints a trustee who is authorised to act in all matters on behalf of the bankrupt estate. His primary objectives are to liquidate the debtor’s assets and distribute the proceeds between the creditors. Creditors need to file their claims with the trustee for assessment.

Insolvency trend Denmark
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