Denmark in One of 'Darkest Chapters of Its Economic History' Due to COVID-19 – Finance Minister

Various economic forecasts predict a GDP fall of up to 16 percent as a result of the coronavirus outbreak and lockdowns which have been initiated to contain it.

Denmark's Finance Minister Nicolai Wammen expects the country's economy to shrink by between 3 and 6 percent in 2020 as a result of measures taken to get the coronavirus pandemic under control.

“The second quarter of 2020 is set to become one of the blackest chapters in Danish economic history,” Nicolai Wammen said, as quoted by the newspaper Finans, which described the situation as a “free fall”.

Wammen warned that the real impact of the pandemic is still to come, and envisioned three scenarios. Even in best-case scenario, if the country now reopens its economy relatively rapidly over the coming months, the finance ministry still estimates public finances to plummet from a healthy 5 percent surplus to a 2 percent deficit, while GDP will fall by 3 percent.

Should the crisis become more drawn-out, the deficit could reach a dangerous 7 percent, while GDP could fall by as much as 6 percent. A middle scenario of a more gradual reopening, meanwhile, would see a 4.5 percent GDP drop and a 6 percent deficit.

“We don't know yet which of the scenarios, one, two or three we're in for,” Wammen said. “The developments are so powerful that we do not know if the assessments will be outdated in just a few months”.

The Danish government had previously funnelled over DKK 270 billion (about $40 billion) into emergency measures to help the economy cope with the lockdown. Earlier this week, Wammen pledged another DKK 35 billion ($5 billion) to be made available to small and mid-sized businesses.

Nevertheless, despite prompt government action and extensive relief measures, unemployment has shot up by almost 45,000 so far, whereas another 73,000 have been sent home on unpaid leave. These are sobering figures in a country with approximately 5.8 million people, of whom about 2.8 million are employed, according to Trading Economics. Denmark is estimated to see approximately 1,500 people file for unemployment per day, Danish Radio reported.

Meanwhile, other forecasts predict even more gloom and doom for the Danish economy. Denmark's National Bank has previously projected that the GDP will slide by as much as 10 percent.

Also, four of the country's leading economists, Aarhus University professors Michael Svare, Torben Andersen and Phillipp Schröder, and McKinsey partner Jens Riis Andersen, predicted “the largest quarterly decline in activity in our lifetime”, envisaging GDP losses between 11 and 16 percent, depending on the length of the shutdown and the toll on the global economy.

So far, Denmark has seen 5,635 confirmed cases of coronavirus, with 237 fatalities. An additional 200 cases were recorded in the Faroe Islands and in Greenland, parts of the Danish Realm.