NOKDKK: Everything is Relative

Denmark’s 2014 PPP-GDP is approximately USD €267 billion with a per capita GDP of €37,409.00. The gross national savings rate is nearly 24.5% of GDP and household consumption about 49% of GDP. In spite of the Eurozone recession, its unemployment rate is under 4%. Denmark exports mostly to the Eurozone, Germany leading the list accounting for almost 16% of exports. Sweden is second accounting for 13.5% of exports. Otherwise, 6.5% of exports are to the US. On the other hand, Denmark imports mostly from Europe with Germany and Sweden leading the list accounting for almost 24% of imports. The largest import partner outside the Eurozone is China, accounting for over 6.5% of imports. Income distribution is in the 24th percentile by the Gini measure. Denmark is a member of the European System of Central Banks (ESCB) and the ECB’s General Council although not an EU member state. 

Denmark is a net exporter. At 175,000 BBL per month it’s Europe’s 3rd largest oil exporter. The better part of Denmark’s exports revenues are from packaged pharmaceuticals, refined petroleum products, agricultural products, electrical equipment, electronics components and electricity. Denmark is one of Europe’s leading producers of high quality agricultural products as well as the leader in agricultural productivity. Over several decades, Denmark mostly family owned farms have invested in agricultural technology, developed organic, sustainable farming methods and organized cooperatives to share processing costs. Although Danish economic prosperity results mainly from non-petroleum exports, it’s not immune from the EU recession. Denmark’s 4th quarter GDP final revision was 0.5% and the 2015 annualized forecast is estimated at 1.7% lowered from 1.8%.

Denmark is nearly energy independent. The same average 7.5 meter/hour wind speed which powered its iconic windmills now drive wind turbines. Excess electric power production is exported to Germany and Norway. Denmark borders Sweden to the Northwest and Germany on the south. It has major ports along its North Sea and Baltic Sea coastlines.

The European Exchange Rate Mechanism (ERM2) pegs the Krone (DKK) to the Euro maintaining exchange rate of 7.29252 to 7.62824 Krone per Euro. It should be noted that the Danish Krone is the only Eurozone currency obligated by ERM2. The mandate has been quite a challenge to DNB in 2015. Danmarks NationalBank’s purpose is to issue currency and maintain financial stability within the bounds of ERM2. It was speculated, Denmark would follow Switzerland’s decoupling but DNB ‘fiercely’ stood its ground, lowering the certificate of deposit rate four times in three weeks to -0.75% to weaken the Krone against a ‘tsunami’ of speculative capital. The well-engineered defense of ERM2 enabled DNB’s governor, Lars Rohde, to boldly claim that DNB “could go on forever” defending the ERM2 peg. The central bank currently maintains a 0.0% demand deposit account rate. DNB sells CD’s during regular open market operations and is authorized to maintain liquidity and adjust key rates always maintaining the ERM2 peg. The target lending rate was recently set at 0.05% and the official discount rate 0.0% since 2012. Denmark’s sovereign debt is prime and ranks 7th out of 100 in terms of sovereign debt risk, in spite of the volatility it endured early in 2015. 
 
Denmark’s neighbor to the north, Norway is similar in size, prosperity and exports. Denmark’s GDP is 13% smaller; per capita PPP-GDP about 38% less; household savings about 34% less; household consumption as a percentage of GDP is about 16% greater; 4th quarter GDP was identical at 0.5%, however Denmark’s annualized GDP forecast of 1.7% is 55.4% greater than Norway’s annualized GDP forecasted 1.1% growth. The question is then, how do their currencies compare?