Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the cases of sovereigns, sub-sovereigns and supranational organisations that may act as a lender of last resort.

Scope performs monitoring reviews to determine whether material changes and/or changes in macro-economic or financial-market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit rating’s performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope announces the result of each monitoring review on its website and/or on its subscription platform ScopeOne.

Scope completed the monitoring review for the Kingdom of Denmark (long-term local and foreign-currency issuer and senior unsecured debt ratings: AAA/Stable; short-term local- and foreign-currency issuer ratings: S-1+/Stable) on 24 February 2025.

This monitoring note does not constitute a credit-rating action, nor does it indicate the likelihood that Scope will conduct a credit-rating action in the short term. Information about the latest credit-rating action connected with this monitoring note along with the associated ratings history can be found on www.scoperatings.com.

Key rating factors

For the updated rating report accompanying this review, please see here.

The Kingdom of Denmark’s long-term AAA/Stable ratings are underpinned by the following credit strengths: i) the country’s wealthy and competitive economy; ii) sound public finances and a low level of public debt; iii) a solid external position, driven by consistent current-account surpluses; and iv) a strong institutional framework and stable governance. These factors enhance the country’s resilience to economic shocks and provide the government with fiscal space to support the economy through appropriate countercyclical fiscal measures.

The Danish economy recovered strongly after the Covid-19 pandemic and proved resilient during the energy crisis, growing by 2.7% in 2022 and 2.5% in 2023, despite higher inflation and rising interest rates. Real GDP grew further by 3.6% in 2024, driven by declining inflation, which boosted domestic demand, alongside a strong performance in the pharmaceutical sector. This supported the industrial production and export activities, while other manufacturing industries faced stronger economic headwinds. Going forward, Scope expects the economic recovery to extend beyond the pharmaceutical and export sectors, with real GDP growth projected at 2.7% in 2025, before normalizing at 1.6% in 2026. Growth is expected to become more broad-based, supported by low and stable inflation, expectations of interest rate cuts and increasing real wages. These factors will continue to support purchasing power and therefore private consumption. The introduction of potential US tariffs on Danish imports is not expected to have severe impacts on the country’s economy, given that a significant share of good exports is produced overseas and concentrated in non-cyclical sectors, such as pharmaceutics. By 2027, Scope expects real GDP to converge toward a potential growth rate of 1.5%.

Scope also expects the general government headline balance to remain in surplus at around 2.9% in 2024 and 1.3% of GDP in 2025 and 1.2% in 2026, while the debt-to-GDP ratio is projected to remain below 30% over the medium-term, despite rising spending pressures from an ageing population and investment needs. Denmark’s accumulated fiscal buffers, resulting from continued fiscal surpluses, will provide the government with ample fiscal space to gradually ease fiscal policy and support a soft landing for the economy. The government is expected to prioritize spending on defence and security, healthcare, green transition, lower tax burdens on workers and businesses, and increased welfare resources for municipalities.

Challenges relate to: i) vulnerabilities in the Danish financial system, including from high household debt, although partially mitigated by high levels of households’ assets; and ii) banking sector vulnerabilities related to property prices fluctuations.

The Stable Outlook reflects Scope’s view that risks to the ratings are balanced.

The rating/Outlook could be downgraded if, individually or collectively: i) increase in financial system risks resulting in broader systemic risk, which lead to the materialization of contingent liabilities on the government’s balance sheet; ii) a significant and sustained deterioration in the medium-term economic and/or fiscal outlooks.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Rating Methodology, 27 January 2025) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst Alessandra Poli, Analyst

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