Economy of Denmark

The economy of Denmark is a modern high-income and highly developed mixed economy. The economy of Denmark is dominated by the service sector with 80% of all jobs, whereas about 11% of all employees work in manufacturing and 2% in agriculture. The nominal gross national income per capita was the ninth-highest in the world at $68,827 in 2023.

Correcting for purchasing power, per capita income was Int$57,781 or 10th-highest globally. The income distribution is relatively equal but inequality has somewhat increased during the last decades. In 2017, Denmark had the seventh-lowest Gini coefficient (a measure of economic inequality) of the then 28 European Union countries. With 5,932,654 inhabitants (1 January 2023), Denmark has the 38th largest national economy in the world measured by nominal gross domestic product (GDP), and the 52nd largest in the world measured by purchasing power parity (PPP).

Denmark has a very long tradition of adhering to a fixed exchange-rate system and still does so today. It is unique among OECD countries to do so while maintaining an independent currency: The Danish krone, which is pegged to the euro. Though eligible to join the EU's Economic and Monetary Union (EMU), Danish voters in a referendum in 2000 rejected exchanging the krone for the euro. Whereas Denmark's neighbours like Norway, Sweden, Poland and the United Kingdom generally follow inflation targeting in their monetary policy, the priority of Denmark's central bank is to maintain exchange rate stability. Consequently, the central bank has no role in a domestic stabilization policy. Since February 2015, the central bank has maintained a negative interest rate to contain an upward exchange rate pressure.

In an international context, a relatively large proportion of the population is part of the labour force, in particular because the female participation rate is very high. In 2017, 78.8% of all 15-to-64-year-old people were active on the labour market, the sixth-highest number among all OECD countries. With a 4.8% unemployment rate, unemployment is relatively low, in comparison to other European countries where the average unemployment rate is 6.7%. The labour market is traditionally characterized by a high degree of union membership rates and collective agreement coverage. Denmark invests heavily in active labor market policies and the concept of flexicurity has been important historically.

Denmark is an example of the Nordic model, characterized by an internationally high tax level, and a correspondingly high level of government-provided services (e.g. health care, child care and education services). There are also income transfers to various groups, such as retirees, disabled people, the unemployed, and students. Altogether, the amount of revenue from taxes paid in 2017 amounted to 46.1% of the GDP. The Danish fiscal policy is generally considered healthy. The net government debt is very close to zero, amounting to 1.3% of GDP in 2017. The Danish fiscal policy is characterized by a long-term outlook, taking into account likely future fiscal demands. During the 2000s, a challenge was perceived to government expenditures in future decades. It was ultimately a challenge to fiscal sustainability from demographic development, in particular higher longevity. Responding to this, age eligibility rules for receiving public age-related transfers were changed. Since 2012, calculations of future fiscal challenges, from both the government and independent analysts, have generally perceived Danish fiscal policy to be sustainable. In recent years, it was considered overly sustainable.