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GDP (2002): $172 billion.
Annual growth rate (real terms): 1.6%.
Per capita income: $32,079.
Agriculture and fisheries (2.4% of GDP at gross value added): Products--meat, milk, grains, seeds, hides, fur skin, fish and shellfish.
Industry (21.0% of GDP at gross value added): Types--industrial and construction equipment, food processing, electronics, chemicals, pharmaceuticals, furniture, textiles, windmills, and ships.
Natural resources: North Sea--oil and gas, fish. Greenland--fish and shrimp, potential for hydrocarbons and minerals, including zinc, lead, molybdenum, uranium, gold, platinum. The Faroe Islands--fish, potential for hydrocarbons.
Trade (2002): Exports--$56.1 billion: manufactured goods 80% (of which machinery and instruments 37%); agricultural products 10% (of which pork and pork products cover 48%), fuels 2%, fish and fish products 3%, other 4%. Imports--$48.8 billion: raw materials and semi-manufactures 43%, consumer goods 28%, capital equipment 15%, transport equipment 8%, fuels 4%, other 2%. Partners (% of total trade in goods)--Germany 21%, Sweden 12%, U.K. 9%, U.S. 5%, Norway 5%, Japan 2%, east European countries 5%.
Official exchange rate: (2001 avg.): 8.32 kroner=U.S. $1; (2002 avg.): 7.88 kroner=U.S. $1.
Denmark's industrialized market economy depends on imported raw materials and foreign trade. Within the European Union, Denmark advocates a liberal trade policy. Its standard of living is among the highest in the world, and the Danes devote about 1% of GNP to foreign aid to less developed countries. In addition, Denmark in 2002 is devoting 0.33% of GNP for peace and stability purposes, including to cover preasylum costs for refugees, and for environmental purposes in central and eastern Europe and in developing countries.
Denmark is a net exporter of food and energy. Its principal exports are machinery, instruments, and food products. The United States is Denmark's largest non-European trading partner, accounting for about 6% of total Danish merchandise trade. Aircraft, computers, machinery, and instruments are among the major U.S. exports to Denmark. Among major Danish exports to the United States are industrial machinery, chemical products, furniture, pharmaceuticals, canned ham and pork, windmills, and plastic toy blocks (Lego). In addition, Denmark has a significant services trade with the U.S., a major share of it stemming from Danish-controlled ships engaged in container traffic to and from the United States (notably by Maersk-SeaLand). There are some 325 U.S.-owned companies in Denmark.
The Danish economy is fundamentally strong. Since the mid-1990s, economic growth rates have averaged close to 3%, the formerly high official unemployment rate stands at 5.8%, and public finances have been in surplus. Except for one year--1998--Denmark since 1989 has had comfortable balance-of-payments current account surpluses, in 2002 corresponding to 2.9% of GDP. The former Social Democratic lead government coalition lowered marginal income tax rates but at the same time reduced tax deductions, increased environmental taxes, and introduced a series of user fees, thus increasing overall revenues. Under the tax reform plan agreed upon by the government and the Danish People's Party on March 31, 2003, taxpayers will receive tax relief next year, albeit at lesser rate than the government proposed originally. Denmark has maintained a stable currency policy since the early 1980s, formerly with the krone linked to the deutschmark and since January 1, 1999, to the euro. Denmark meets, and even exceeds, the economic convergence criteria for participating in the third phase (a common European currency--the euro) of the European Monetary Union (EMU). Although a referendum on EMU participation held on September 28, 2000 resulted in a firm "no" and Denmark, therefore, has not yet adopted the euro, opinion polls show support for EMU membership now exceeds 60%.
Danes are generally proud of their welfare safety net, which ensures that all Danes receive basic health care and need not fear real poverty. However, at present the number of working-age Danes living mostly on government transfer payments counts more than 800,000 persons (roughly 23% of the working-age population). Although this number has been reduced in recent years, the heavy load of government transfer payments burden other parts of the system. Health care, other than for acute problems, and care for the elderly and children have particularly suffered, while taxes remain at a painful level. More than one-fourth of the labor force is employed in the public sector.
Greenland and the Faroe Islands
The Greenland economy has increased by an average of some 3% to 4% annually since 1993, the result of increasing catches and exports of shrimp, Greenland halibut and, more recently, crab. However, it was not until 1999 the economy had fully recovered from the economic downturn in the early 1990s. The Greenland Home Rule Government (GHRG) during the last decade has pursued a fiscal policy with mostly small budget surpluses and with low inflation. The GHRG has taken initiatives to increase the labor force and thus employment by, i.a., raising the retirement age from 60 to 63 years. However, structural reforms are still needed in order to create a broader business base and economic growth through more efficient use of existing resources in both the public and the private sector. Due to the continued critical dependence on exports of fish, the economy remains very vulnerable to foreign developments. The public sector, including publicly owned enterprises and the municipalities, plays the dominant role in Greenland's economy. Close to one-half of the government revenues come from grants from the Danish Government, an important supplement of GDP. Greenland has registered a foreign trade deficit since the closure of the last remaining lead and zinc mine in 1989. Despite several interesting hydrocarbon and mineral exploration activities, it will take several years before production can materialize. Besides a continued increase in local content, i.e., using Greenlandic rather than Danish work force in both public and private sector, tourism appears to be the sector that offers the best near term potential and even this is limited due to a short season and high costs.
The Faroese economy has performed strongly since the mid-1990s with annual growth rates averaging close to 6%, mostly as a result of increasing fish landings and salmon farming and high and stable export prices. Unemployment is insignificant and there are labor shortages in several sectors. Most of the Faroese who emigrated in the early 1990s (some 10% of the population) due to the economic recession, have now returned to the Faroe Islands. The positive economic development also has helped the Faroese Home Rule Government produce increasing budget surpluses that in turn help to reduce the large public debt, most of it to Denmark. However, the total dependence on fishing and salmon farming makes the Faroese economy very vulnerable, and the present fishing efforts appear in excess of what is required to ensure a sustainable level of fishing in the long term. Initial discoveries of oil in the Faroese area give hope for eventual oil production, which may lay the basis for a more diversified economy and thus less dependence on Denmark and Danish economic assistance. Aided by a substantial annual subsidy from Denmark, albeit reduced from some 10% of GDP to about 6% in 2002, the Faroese have a standard of living comparable to that of the Danes and other Scandinavians.
Politically, the present Faroese Home Rule Government has initiated a process toward greater independence from Denmark, if not complete secession from the Realm, a project of which the outcome is too early to predict. In that respect, agreement on how to phase out the Danish subsidy plays a crucial role.