Denmark’s inflation rate reached its highest level in nearly four decades amid a rise in food and energy prices that threatens to halt economic growth in the Nordic country.
In August, the consumer price index soared 8.9% from last year, which is the fastest pace since 1983, Statistics Denmark said. In July, the price index rose 8.7 percent.
According to Sydbank senior economist Mathias Dollerup Sproegel, who called inflation “the Achilles’ heel in both the Danish and the European economy,” given the current price level, an average Danish family will have to spend an extra 40,000 DKK ($5,400) per year on consumer goods, compared with 2021.
Arbejdernes Landsbank chief economist Jeppe Juul Borre admitted that the inflation was causing a “fragile situation”, envisaging a possible “further increase”. “That’s frightening at an uncertain time, when we’re also heading for colder weather,” he added, referring to numerous warnings of possible power outages this coming winter, albeit as a last-resort tool.
On 31 August, Denmark’s government cut its economic growth forecast for both this year and 2023, given the rising inflation that impairs spending power and damages the labor market. According to the Danish Finance Ministry, the overall inflation rate will jump to 7.3 percent this year and subsequently slow down to 3.3 percent next year.
The Danish government has already earmarked DKK 2 billion ($270 million) for relief efforts to counter the impact of galloping inflation in its budget proposal for next year. This year, a total of DKK 2.4 billion ($330 million) has been allocated in aid to low-income families hit by higher heating costs, coupled with frozen rent increases.
Europe’s ongoing inflation and cost-of-living crisis are largely self-inflicted. Among others, the energy crunch has been aggravated by the massive sanctions campaign against Moscow over its ongoing special military operation in Ukraine. The EU members decided to drastically reduce their purchase of Russian oil, gas, coal, and electricity.