kredietrisico-beperken-kredietverzekering
Denmark

Denmark

Population 5.8 million
GDP 68,202 US$
A2
Country risk assessment
A1
Business Climate
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Synthesis

major macro economic indicators

  2020 2021 2022 (e) 2023 (p)
GDP growth (%) -2.0 4.9 3.1 0.8
Inflation (yearly average, %) 0.4 1.9 7.7 5.1
Budget balance (% GDP) 0.2 3.6 1.7 0.4
Current account balance (% GDP) 7.9 9.0 13.0 10.5
Public debt (% GDP) 42.2 36.6 32.1 30.5

(e): Estimate (f): Forecast

STRENGTHS

  • World’s second largest shipping operator (2022)
  • Almost energy self-sufficient (oil and gas in the North Sea and Greenland, as well as numerous wind-energy parks)
  • Niche industries with cyclically non-sensitive export goods (e.g. pharmaceuticals, wind turbines, food products)
  • Well managed public finances
  • Large current account surplus
  • Krone pegged to the euro

WEAKNESSES

  • Small open economy sensitive to external demand, especially from Germany and Sweden
  • Strong fragmentation of parliament, making coalition building difficult (threshold to enter the parliament is only 2% for a party; 4 extra seats for Faroes Islands and Greenland)
  • Very high household debt (242% of net disposable income, 2021)
  • Public sector constitutes a significant part of the country’s employment (32% of employees in early 2022)
  • High private external debt (150% of GDP, 2021)
  • Strengthening independence movement in Greenland

Risk assessment

Danish economic outlook impacted by strong inflation

The war in Ukraine and the related EU sanctions against Russia and Belarus weigh only modestly on the outlook for the Danish economy in 2022. The direct effects of the sanctions should be limited as Russia accounts for less than 1% of Denmark’s goods exports and only 2% of its imports. Meanwhile, Ukraine accounts for less than 1% of Denmark’s exports and imports (2020). Furthermore, the cut in Russian gas supply to Denmark, as a result of its refusal to pay in roubles, has a limited effect on the Danish economic outlook as gas accounted for only 6% of the energy mix in 2021 (and can be replaced by other sources), compared with 48% for wind, 21% for bioenergy and 16% for coal. While the direct impact is limited, the indirect one, via higher energy prices, is spreading over to food and other goods prices because of higher production and transportation costs. This significantly affects the Danish economy, as inflation reached 8.2% in June 2022, its highest level since 1983 when the second oil price shock hit Denmark. It is expected to increase even further during the year before starting to decrease thanks to base effects (provided Russia does not stop all gas and oil deliveries to Western Europe, which would result in a further explosion of energy prices). The strong inflation has eroded households’ purchasing power, pushing consumer sentiment indicators are at record lows. This summer/autumn, the strong savings and government support for energy prices should sustain consumption, but it is unclear how long it can hold. For now, it is supported by the strong labour market, where the unemployment rate reached a 14-year low and job vacancies are close to double their pre-pandemic level. Higher wage demands are therefore possible, but this will also depend on the inflation expectations among workers and employers. To keep inflation expectations stable, Denmark’s Central Bank is expected to increase its key interest rate (rate paid on certificates of deposit) from its current level of -0.6% (mid-July 2022) by at least 100 basis points by the end of 2022. However, the central bank is limited in its actions by the monetary policy of the ECB as the Danish Krone is pegged to the euro. The rising interest rate will also trim private expenditure, notably housing investment, as the (mostly variable) interest rates of mortgages have already risen noticeably in early summer 2022. Overall, private investment should be limited in 2022 due to the high inflation, as well as rising financial and geopolitical uncertainty. Furthermore, government spending will slow as the expenditures linked to aid for higher energy prices will not be offset by the end of the pandemic emergency spending schemes. In addition, this is only partly balanced out by the investments under the EU Recovery Fund, from which Denmark is receiving EUR 808 million for the period 2021-2027 for investments focusing on green and digital transition. Still, the outlook for Denmark is better than for most other European countries as Denmark has specialized in niche markets, including food products (pork and cheese), pharmaceuticals and renewable energy technology, which are less sensitive to cyclical fluctuations.

 

Public budget surplus shrinks

In 2022, we expect a decline in the public budget surplus. While public consumption and investment should remain modest, the expenses linked to the war in the Ukraine (support for households and firms, and for refugees and defence expenditures) will have a noticeable impact on the budget. Accordingly, the gross public debt load will shrink at a slightly slower pace, but will remain very low in European comparison. The current account surplus should remain strong. While the goods trade surplus should decrease somewhat due to the softening demand from Denmark’s trading partners in Western Europe, this should be levelled out by a stronger services trade surplus as the demand for shipping services is further increasing and tourists are coming back.

 

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 other “red-block” parties: the Social Liberal Party, the Socialists People’s Party, the Red-Green Alliance and three small parties from Greenland and the Faroes Islands. Thanks to a generally successful handling of the pandemic, in combination with popular right-wing immigration policies and a divided conservative/right-wing opposition, popular support for the SD has remained high. Frederiksen, for now, has also survived a political scandal around her illegal order to kill all living mink in Denmark in November 2020, as a prophylactic measure to avoid a further spread of a new mutation of the COVID-19 virus. A parliamentary commission announced that her statements were “grossly misleading”, but they did not conclude Frederisken was guilty of gross negligence as she did not know that her order was illegal. However, with the war in the Ukraine, the focus of the public changed. The Danes voted on 1 June 2022 to join the European Union's defence and security common policy, ending a 30‑year opt‑out. As the Danes favour stability in the current uncertain situation, Frederiksen should remain in office until the next regular election in 2023.

 

Last updated: August 2022

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 1 August 2002 is either the Danish National Bank’s benchmark, or the lending rate (udlånsrente) in force on 1 January or 1 July 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 EUR 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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