COUNTRY ANALYSIS REPORT
In-depth PESTLE insights
Publication Date: March 2011
This profile analyzes the political, economic, social, technological, legal, and environmental (PESTLE) structure in Denmark. Each of the PESTLE factors is explored in terms of four parameters: current strengths, current challenges, future prospects, and future risks.
Key findings Denmark has an efficient governance system in place, but the rise of hardliners may lead to political instability in the future Given its strong democratic traditions, regulatory quality, and governmental effectiveness, the political system of Denmark is a well-respected model. Denmark has a history of consensus-based policies, which means that legislation is enacted only after extensive negotiations and compromise with non-government or even opposition parties. This helps create a stable political environment for businesses, as policies reflect a wide range of interests, and are rarely reversed even after a change in government. Although there was an administration change in 2001 when the Social Democrats surrendered control to a coalition between Venstre, Liberal Party of Denmark and the Conservative People's Party, the new government maintained the existing welfare system and persisted with reform measures pertaining to the labor force and taxation; as a result, Denmark did not experience any drastic policy shifts. Nevertheless, the political landscape of the country has been changing in recent years due to increasing support for right-wing parties. The share held by the Danish People’s Party has been constantly increasing in parliament; in the 2007 elections, it gained 25 seats and is currently a partner in the coalition government. The party is known for its tough anti-immigration and anti-Islamic views. The rise of such parties may change the country's political and social landscape in the future.
The Danish economy recovered in 2010, but rising public sector spending may create structural problems Denmark's small, open economy was hit hard by the fall in international trade in 2008–09. This, coupled with the impact of the economic crisis on the Danish property market, resulted in the largest decline in GDP (which dropped by -4.7% in 2009 alone) in almost four decades. Denmark’s economy showed a surprise contraction in real GDP of 0.4% quarter-on-quarter
Country Analysis Report: Denmark
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Published 03/2011 Page 1
in the final three months of 2010. The economy recovered in 2010, with GDP growing at a rate of 2.2%; however, this was largely due to the turning of the inventory cycle. Underlying demand growth remains weak, and the country’s economic growth is expected to drop to 1.7% in 2011. Before the economic crisis set in, Denmark had one of the strongest public finances among the European Union (EU) nations. As of December 2010, Denmark's government expected a 2011 public sector deficit of 4.7% of GDP, compared to the previous estimate of 4.4% made in August 2010. Rising public sector spending is creating problems for the country’s economy, and is expected to lead to serious structural problems by 2030. The increase in public sector spending is mainly due to a remarkable growth in the number of state employees. Around 12,500 more people were employed by the state in 2010, and this figure is expected to continue to increase in 2011. In the near term, the increasing budget deficit will remain a problem.
Denmark is home to extensive social welfare programs, but the nation's aging population will be a drain on public finances Denmark has performed well on various social parameters, mainly because of the dominance of socialist parties for nearly half a century. The United Nations Development Programme (UNDP) Human Development Index (HDI) for Denmark is 0.866, which placed the country 19th out of 169 countries in 2010....
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