Forecast - Denmark
Co-operation between the minority Liberal-Conservative coalition and its parliamentary support partner, the populist Danish People's Party (DF), is expected to remain solid until the next election, which must be held by February 2009. The Economist Intelligence Unit expects the prime minister, Anders Fogh Rasmussen, to call an election in late 2008, although an earlier date is possible if the government loses its parliamentary majority. Strong budget surpluses will allow the government to maintain a moderately expansionary fiscal policy in 2007-08.
The rate of corporate tax will be reduced from 28% to 25% in July 2007. Personal income tax cuts are likely to be introduced in 2008. We expect GDP to slow gradually from 3.2% in 2006 to 2.3% in 2007 and 1.8% in 2008. Inflation should remain moderate. The current-account surplus fell from 3.8% of GDP in 2005 to 2.4% of GDP in 2006 and is forecast to fall further in 2007, before recovering slightly in 2008.
