DENMARK SEPTEMBER ECONOMIC HIGHLIGHTS

UNCLAS SECTION 01 OF 02 COPENHAGEN 000444 SIPDIS STATE FOR EEB/IFD/OMA, EEB/TPP/ABT, EUR/NB TREASURY FOR DAVID WRIGHT COMMERCE FOR PAUL DACHER E.O. 12958: N/A TAGS: ECON EFIN ENRG ETRD EWWT KTDB PGOV DA SUBJECT: DENMARK SEPTEMBER ECONOMIC HIGHLIGHTS COPENHAGEN 00000444 001.2 OF 002 CONTENTS -------------- ECON: Denmark GDP Down Sharply in Q2 ECON: Productivity Concerns Persist EFIN: Interest Rate Spread Back to Pre-Crisis Levels EWWT: Maersk Confident Despite Financial Crisis ENRG: GE Wind Looking to Expand in Northern Europe Denmark GDP Down Sharply in Q2 -------------- ¶1. Danish GDP contracted by 2.6% in the second quarter of 2009, due primarily to massive declines in investment of 10.3% and net trade, with imports down 3.9% and exports down 4.5%. Private consumption also showed a minor decline of 0.3%. Government consumption was up by 0.5%, but was insufficient to counter the combined downturn in other GDP components. Compared to the same period in 2008, 2009 Q2 GDP was down by 7.2%. GDP contracted by 5.3% in the first half of 2009 compared to the first half of 2008. The new figures have shocked local analysts, who have revised downward their expectations for the Danish economy and are now projecting a total contraction for 2009 GDP of 4.5% - 5% (previous projections were 3.5% - 4%). Retail sales were down in August by 1.2% compared to July, and down 4.6% compared to August 2008. The value of transactions using the Dankort, the cash card used as a primary means of payment and often taken as an indicator for trends in private consumption, was 6.3% less in August than in July, making for a grim month for the hoped-for consumer driven recovery. Extrapolating from the OECD's most recent July statistics, we estimate the current unemployment rate basically unchanged at around 6.4%. Productivity Concerns Persist -------------- ¶2. According to an OECD report, Denmark is expected to have the fourth slowest GDP growth among OECD countries between 2008 and 2017, primarily due to lagging productivity growth. The Danish government released a discussion paper estimating Denmark will lose DKK 20 billion (USD 3.95 billion and over 1% of GDP) annually in potential GDP growth due to lower than projected productivity growth. As a response, the government has launched the Growth Forum, comprising CEOs from Denmark's biggest companies, ministers, scientists, labor market representatives and economists, to find solutions to improve productivity growth. With current GDP figures worse than expected and private consumption not showing signs of a pickup, Danish businesses and the opposition are increasing their calls for additional stimuli in next year's public budget. However, the government remains reluctant to launch additional stimulus initiatives at this point. Interest Rate Spread Back to Pre-Crisis Levels -------------- - ¶3. The Danish National Bank lowered its leading lending rate, effective September 25, to 1.25%, thereby returning to the pre-crisis spread of 0.25% to the ECB lending rate. The spread rose to 1.75% in defense of the Kroner last autumn. On September 29 the main deposit rates were lowered as well -- the Current Account rate to 0.9% from 1.0% and the certificates of deposit rate to 1.0% from 1.15%. Local commentators believe the Bank will not lower the lending rate any further unless the ECB moves first, which would be unexpected. Maersk Confident Despite Financial Crisis -------------- ¶4. Maersk Line presented 2009 first half losses big enough to pull the entire Maersk Group into the red, the first time that has happened in their 105 year history. However, Maersk Group CEO Nils Smedegaard Andersen is attempting to project confidence and claiming the firm has the situation under control. Maersk Line underwent massive restructuring over the last couple of years, starting prior to the crisis, and the cost cutting and efficiency improvements are now paying off. Prior to the crisis, Maersk Line was earning USD 200 less per container than its competitors, but with the restructuring they are now making USD 100 more. Andersen projects the freight market will be in imbalance for the next couple of years, but that Maersk Group will come through the crisis strengthened as it is already gaining market share on its supply services and terminal businesses. GE Wind Looking to Expand in Northern Europe -------------- ¶5. With the shutting down of ship building at the Lindo shipyard, it appears the facility is likely to become a center for off-shore wind turbines. GE Wind and Siemens Wind Power are both reported to be interested in establishing separate operations for production and shipping of off-shore wind turbines for the Northern European market at the former shipyard. American GE Wind recently entered the off-shore market by purchasing a small Norwegian producer. They COPENHAGEN 00000444 002.2 OF 002 have expressed that they want their share of the European market and intend to build facilities on the European continent. FULTON