Nationalbanken, Denmark’s central bank, said in a new forecast on Thursday that the current stable economy could be affected in the long term by the war in the Middle East.
The central bank predicted that the Danish economy will grow by 1.8 percent in 2026 and is in generally healthy condition despite global instability.
It warned that its forecast could change depending on developments related to the war in the Middle East.
“It is expected that the war will have a negative effect on global activity and also result in higher inflation, but there is an extraordinary amount of uncertainty related to both the size and the duration of the predicted economic consequences,” the bank said in its forecast.
The central bank noted energy prices in Denmark as particularly sensitive to the war and thereby able to affect Danish businesses and individuals.
Ongoing disruptions to the supply of oil and gas from the Persian Gulf over the coming years could cause inflation to more than double to 4.5 percent, it said.
That would restrict growth to around 1 percent.
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However, the bank still expects 1.8 percent growth this year, close to the 2 percent achieved in 2025.
Employment could rise by as much as 38,000, while the number of unemployed people could also go up by around 2,000.
There is good news for people in employment as well as homeowners, with wages forecast to grow faster than inflation and house prices predicted to gain around 6 percent on average this year.
As is usual in its annual reports, the central bank has also issued recommendations for government fiscal policy.
Because of the planned expansion of the defence budget and general global uncertainty, the new government (once it takes office) should “exercise caution” before spending any budgetary surplus, it advised.
It also warned against stimulating the economy unnecessarily at a time when the supply of labour is low, due to the risk that this could cause excessive wage rises and inflation.