Denmark sees lower economic growth this year due to Ukraine war

A view of Copenhagen is seen from the top of the Trinitatis Church
FILE PHOTO: A view of Copenhagen is seen from the top of the Trinitatis Church, Denmark April 29, 2018. REUTERS/Benoit Tessier

March 21, 2022

COPENHAGEN (Reuters) -The war in Ukraine will drive up inflation and could shave between 0.6 and 2.8 percentage points off Denmark’s expected economic growth this year, the Finance Ministry said on Monday.

The Danish economy was set for a rapid recovery after the pandemic this year but the boom will now be dented as the uncertainty stemming from Russia’s invasion of Ukraine takes it toll.

“Denmark’s direct trade with Russia is limited. However, the Danish economy is also indirectly affected by countries such as Germany and Finland which trade more with Russia,” the ministry said in a statement

Denmark’s economy this year is now seen as growing 2.2% in a mild scenario, 1.6% in a medium scenario and 0.0% in the toughest scenario, the ministry said, underlining that the projections are still uncertain.

The ministry in December forecast economic growth of 2.8% this year.

Inflation is expected to increase to 4.5% in the medium scenario up from the 2.2% seen in the December forecast.

The Danish central bank last week said it expects the economy to grow 2.1% this year, down from an earlier prediction of 3.1% growth.

(Reporting by Stine Jacobsen and Nikolaj Skydsgaard; Editing by Angus MacSwan)