These are the experts' predictions for the Danish economy for the new year (inflation, wages, unemployment, interest rates, house prices and electricity).

TV2 published a report on the economic forecasts of 12 Danish economists for the new year 2023, regarding, for example, inflation, salaries, stocks, interest rates, and housing prices. Here are the highlights:

inflation

Within a year, inflation will be around 2%. The first thing economists are asked about is rising prices, also called inflation. This year it came at a much higher pace than the Danish economy is used to. Central banks like Danmarkt Nationalbank usually aim for annual inflation close to 2%, but from November 2021 to November 2022, prices in Denmark rose by 8.9%. However, if you ask the twelve economists, most of them predict that by the end of next year we will see inflation close to the normal rate, i.e., around 2%.

Salaries (wages)

Danes' wages will feel more valuable. Because prices rose sharply last year, people will have to spend more to buy the same quantity of goods. When a salary isn't enough to cover all expenses, it becomes less valuable—a phenomenon known in economics as real wage decline. The latest report from the Danish Employers' Association for the third quarter of this year shows that real wages in Denmark fell by 5.21 TP3T compared to the same period last year. However, because inflation is expected to be better controlled, most economists predict that we will be able to buy a little more with our wages again within a year.

Unemployment

Unemployment is set to rise by 25,000 to 35,000, as both consumers and businesses face significant pressure from high prices. However, inflation has not yet resulted in widespread layoffs. In fact, the number of unemployed in the Danish labor market fell to just 71,200 in April, equivalent to 2.41 TP3T of the workforce. The last time unemployment was so low was during the financial crisis, and since then, it has been rising, marking one of the first tangible signs of an economic slowdown. If you ask a dozen economists, they say that rising unemployment is just the beginning.

Interest rates

Low interest rates are not going to return anytime soon.
In an effort to control inflation, central banks around the world have raised interest rates at a historic pace. The explanation, in short, is that when interest rates rise, borrowing money becomes more expensive. When borrowing becomes more expensive, businesses and consumers generally spend less. This, in turn, means that mortgages become more expensive, which is why many have had to scale back their housing ambitions or put their plans to buy new property on hold for now. At the same time, this negatively impacts housing prices when people have less money. Currently, the long-term mortgage rate—the most important interest rate when you need, for example, a fixed-rate mortgage for 30 years—is at its highest level in a decade. None of the twelve economists surveyed expect us to return to historically low interest rates—like those we saw before the pandemic—anytime soon.

housing prices

Housing prices will continue to fall. The coronavirus crisis forced Danes to spend more time indoors, while simultaneously giving them more money and more free time. However, the housing market experienced a surge, peaking in June with a record high of 17,700 Danish kroner per square meter for villas and terraced houses. Rising interest rates and high energy prices have since caused prices to fall, with the Housing Authority recording its largest monthly decline ever. Economists expect this trend to continue into the new year.

Electricity price

Electricity prices will either fall or stay the same. In 2022, record-high electricity prices became a major topic of conversation, and the situation appeared even worse at the end of August when the average daily price per kilowatt-hour exceeded 5 kroner, including tariffs, taxes, and VAT. The explanations are numerous and complex, but in short, the war in Ukraine and other factors, such as problems at several power plants, combined with a harsh European summer, created a perfect storm that brought the European energy sector to its knees. Since then, prices have fluctuated, but in the first four weeks of December, the average price was around 2.25 Danish kroner. While it is extremely difficult to predict electricity prices more than a few weeks ahead, this is roughly the level economists expect for the new year.