OECD Economic Surveys : Denmark 1964.

31 Pages·1.529 MB·English

by  OECD

D NMARK
I
DENMARK
BASIC STATISTICS
THE LAND
Area (thousand sq.kcn.) (cid:9) 43 Urban population inclusive suburbs
Agriculturalarea(thousandsq.kcn.) 31 (July 1963) :
Copenhagen (cid:9) 1,348.000
Othercities (cid:9) 1,427,000
THE PEOPLE
Population (July 1963) (cid:9) 4.631.500 Labourforce,total(I960) 2.094.000
Numberofinhabitants persq.km (cid:9) 109 Ofwhich inagriculture 366.000
Net natural increase (average 1960-
1962) (cid:9) 32.700
Net per 1,000 inhat. (average 1960-
1962) (cid:9) 7,1
PRODUCTION
Gross national product in 1962 (millions Gross fixed capital formation in I962 :
of kroner) (cid:9) 50,900 Percent of GNP (cid:9) 21
GNP per head (U.S. dollars) (cid:9) 1,584 Perhead (U.S. dollars) ............... 330
THE GOVERNMENT
Public consumption in 1962 (per centof GNP) 13 Composition of Parliament (No of seats) :
General government current revenue in 1962 Social Democrats (cid:9) 76
(per cent of GNP) (cid:9) 29 S0CÎ2I Liberals (cid:9) II
Public grossfixed capital investment (per c_nt -- Liberals (cid:9).,(cid:9) 38
of GNP) (cid:9) 2 Conservarives (cid:9) 32
The Independent Party (cid:9) 6
LeftWing Socialists (cid:9) II
German minority (cid:9) I
Greenland and Faroe Isiands (cid:9) 4
Total (cid:9) 179
Lastgeneral election : I960
Nextgeneralelection: 1964
LIVING STANDARDS
Calorics per head, perday (I961-62) .... Number of passengercars inuseper 1,000inh.
Average hourly earnings of workers in (Dec. 1962) (cid:9) 117
manufacturingandconstructionin I962(in Number of telephones per 1,000inh.(I960) 236
kroner) (cid:9) Numberofradiolic.nccsper 1,000inh.tjI960) 332
FOREIGN TRADE
Exports : Imports :
Exports of goods and services in per cent of Imports of goods and services in per cent of
GNP (1962) (cid:9) 29 GNP (1962) (cid:9) 33
Main exparts in I962(pcrcintapeoftotal mer¬ Main imports in 1962 (percentage of total
chandise exports) : merchandise imports) :
Agricultural products (cid:9) 40 Machinery (cid:9) 13
- Canned mc_t and canned milk (cid:9) 7 Fuels (cid:9) 12
-- Industrial goods (cid:9) 46 Base metals (cid:9) 9
- Other goods (cid:9) 7 Transport equipment (cid:9) II
- Textiles (cid:9) 9
THE CURRENCY
Monetary unit : Krone. Currency unit perU.S. dollar : 6.9I.
ECONOMIC SURVEYS BY THE OECD
DENMARK
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
The OrganisationforEconomic Co-operation and Development was set up under
a ConventionsignedinParis on 14th December1960 by the Membercountries ofthe
Organisation for European Economie Co-operation and by Canada and the United
States. This Conventionprovidesthatthe O.E.C.D. shallpromotepoliciesdesigned :
to achieve the highest sustainable economic growth and employment and a
rising standard of living in Member countries, while maintaining financial
stability, and thus to contribute to the development ofthe world economy ;
to contribute tosoundeconomic expansion in Member as wellasnon-member
countriesintheprocessofeconomicdevelopment ;
to contribute to the expansion ofworld trade on a multilateral, non-discrimi¬
natorybasisinaccordancewithinternationalobligations.
The legalpersonalitypossessed by the OrganisationforEuropean Economic Co¬
operation continues in the O.E.C.D., which came into being on 30th September 1961.
The Members of O.E.C.D. are : Austria, Belgium, Canada, Denmark, France,
the Federal Republic of Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the United
Kingdomandthe UnitedStates.
Thisdocumentwasapproved
bytheEconomicandDevelopmentReviewCommittee
in January 1964.
CONTENTS
I. Recent Developments (cid:9) 5
Output and Demand (cid:9) 7
Incomes and Prices (cid:9) 9
Balance of Payments(cid:9) 9
II. Prospects (cid:9) 12
III. Structural Re-adjustment (cid:9) 13
The Problem (cid:9) 13
Strategy for further Progress (cid:9) 14
Policy Problems (cid:9) 16
IV. Conclusions (cid:9) 18
*
* *
Statistical Annex (cid:9) 21
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DENMARK
1. The strong inflationary pressures that developed in 1961 and
1962 have been arrested. Following the introduction of a very com¬
prehensive stabilisation programme initiated by fiscal policy and
building controls in 1962 and supplemented by direct action on wages,
profits, prices, and savings in 1963 the rise in prices has levelled out,
and the deficit on the current account ofthe balance ofpayments has
disappeared. With foreign borrowing at a relatively high level, the
foreign exchange reserves rose significantly in 1963. Although the
expansion of activity has slowed down, unemployment has remained
low.
2. Now that economic stability has been restored, attention can be
concentrated more than in the recent past on Denmark's longer-term
problems; the particular need is for continued structural adjustments
towards an economic pattern in which agriculture is relatively less
important and industry larger. Thus, after reviewing recent develop¬
ments and short-term prospects, the present survey considers Den¬
mark's major structural problem and the policies required to deal
withit.
I. RECENT DEVELOPMENTS
3. Strong pressures on resources developed in 1961 and 1962.
Fromthebeginning of1961 to mid-1962, consumerprices rosebyabout
10 per cent; a further increase of about 4 per cent took place in the
autumn, but this was largely due to the introduction of a purchase
tax. The deficit on the current account of the balance of payments
roseto more than $ 100millionin 1961 and to an annualrate of $ 240
millioninthefirsthalfof1962(about3.1/2percent ofthegrossnational
product). The net foreign exchange reserves ofthe National and com¬
mercialbanks, despiteaninflow offoreigncapital, fell rapidlyto $ 125
millionin September, the equivalent ofless than one month's merchan¬
dise imports at the current rate.
4. In March 1962, the Government proposed a combination of
restrictive measures to restore economic stability, with the emphasis
on astricterfiscalpolicy and restraint ofbuildingactivity. Butbecause
ofthe need to obtain agreement between the four main political parties,
certain of the measures were not introduced until August. The most
important measures were :
a) A general purchase tax of 9 per cent became effective as from
August 1st, 1962. The tax is levied at the wholesale level
and calculated to yield Kr. 800-900 millions a year about
10 per cent of the Government's current and investment ex¬
penditures. It does not apply to food, fuel and services.
b) A ceiling was placed on Government expenditures for the
fiscal year 1962-63 (ending March 1963).
c) Startsofprivateandpublicbuildingprojectsweretobereduced.
d) Children's allowances were raised and direct taxes reduced
for the lowest income groups; national and disablement pen¬
sions were increased to offsetpart ofthe effects ofthe purchase
tax.
e) Direct tax rates would be reduced from the summer 1963,
with a budgetary cost ofabout D.kr. 750millionincomparison
with the proceeds which would arise from unchanged rates.
f) Direct and indirect taxes were excluded from the wage-regul¬
ating cost ofliving index, effective from 1st January 1963.
5. These measures had a stabilising influence on the economy,
but it was clear at the beginning of 1963 that the improved stability
was already endangered. First, the rise in the cost of living index
was likely to lead to an automatic increase in wages of 3percent in
March-April. Second, there was a clear risk that the income nego¬
tiations scheduled for the first half of 1963 affecting wages and sala¬
ries, farmers' incomes, and old-age pensions would lead to excessive
increases in nominal incomes. Since collective bargaining for the
majority of wage and salary earners had failed to reach a settlement,
therewasalsoariskofseriouslabourconflicts.Moreover,thereductionin
direct taxes was soon to come into effect. When it became clear that
government intervention was needed, the authorities sought, in a co¬
ordinated approach, to arrive at a comprehensive agreement covering
all questions relatingto wages and incomes, including tax policy. Since
the real economic scope for higher incomes was small, the authorities
aimed at maintaining the status quo. In March, a remarkable range of
measures was combined into a programme which took the form of
Parliamentary legislation. The most important provisions of the new
legislation were:
a) the collective agreements expiring at the end of February
were prolonged for a two-year period, with an average in¬
crease in wages of 1.1/4 per cent in the first year (affecting
only the lower-paid workers), and a general increase of 2.1/2
percentinthe secondyear; salaries ofcivil servantsand certain
other groups were to be increased correspondingly, and so
were old-age and disablement pensions;
b) government support payments to agriculturewere to continue
for two years at the same rate as in 1962-63, with only small
increases; the home-market scheme relating to agricultural
prices introduced in October 1962 was prolonged until mid-
1965;
c) a price/profits stop was introduced, with price increases per¬
mitted only where they were justified by increases in costs
resulting from the new legislation or from higher raw material
or transport costs;no increase in absolute dividend payments
in the 1963-1965 period would be permitted;
d) a compulsory savings scheme was adopted; its proceeds were
designed to offset most ofthe loss in budget receipts resulting
from the cut in direct taxes;
6. The measures taken in 1962 had created alarge budget surplus
of about the same size as that achieved when the economy was in rea¬
sonable balance between 1958 and 1960. The distinguishing features of
the March 1963 measures were to introduce an exceptional degree
of official intervention in the field of wages, prices and profits and to
maintain a relatively tight fiscal policy. The very restrictive policy in
respect of the issue of building permits for 1963 decided in November
1962 was supplemented by the postponement of new public building
starts inthe fiscal year 1963-64 until after 1st of September. No major
changes were made in monetary policy; credit conditions had already
been tightened in 1961, whenthediscountrate hadbeenraisedto 6.5per
cent. Indeed, to avoid too abrupt a rise in interest rates, the National
Bank hasbeen supporting the bondmarket by openmarket operations,
and itincreasedits lendinginthe latermonthsof1962andthe beginning
of 1963.
7. As a result of these measures, economic stability has been res¬
tored. The balance of payments has improved significantly, and the
rise in prices has levelled out. The expansion of output and demand
has slowed down, but reasonably full employment conditions have
been maintained.
Output and demand
8. In the absence of a monthly or quarterly production index,
the movement of output during 1963 is difficult to assess. But demand
indicators suggest that the real gross national product rose by only
2percentbetween 1962and 1963. Inthefirstquarter,withbadweather,
activityprobablyfellbelowthelevel ofayearearlierand unemployment
rose sharply. But the spring and summer saw a recovery. In the third
quarter, employment amongst the insured labour force was 1 per cent
higher than in the third quarter of 1962, with no increase in the number
of unemployed. But the number of hours worked in manufacturing
was lower than a year earlier, mainly because ofless overtime work.
Table 1. CENTRAL GOVERNMENT BUDGET
D. Kroner million.
APRIL TO MARCH 1960-61 1961-62 1962-63 1963-641 1964-652
7,317 8,026 9,830 10,960 11,806
Personaltaxes (cid:9) 2,481 2.600 3.229 3,475 3,907
430 449 528 570 700
Customs and excisetaxes (cid:9) 4,171 4,674 5,704 6,475 6,691
Otherrevenue (cid:9) 235 303 369 440 508
Currentand investmentexpenditure ... 6,225 7,802 9,114 10,450 11,249
Civilcurrentexpenditure (cid:9) 4,353 5,662 6,508 7,490 8,171
Civil investmentexpenditure (cid:9) 827 973 1,102 1,340 1,402
Defence(includingcivil defence) .. 1,045 1,167 1,504 1,620 1,676
Surplus on current and investment
account (cid:9) 1,092 224 716 510 557
Totalcapitalexpenditure (cid:9) 926 1,052 768 885 793
Financedby:
a) Surplus on current and invest-
1,092 224 716 510 557
b) Capitalincome3(cid:9) 201 213 232 595 407
615
1. Dudgel, as adopted by Parliament, with some corrections.
2. Hudgel, proposed bv the Government.
3. Of which compulsory savings 1963-64: 345 m. Kr.; 1964-65: 175 m. Kr.
Source: Slatsfinanscrnc 1963, and Danish submission to the O.E.C.D.
Table2. EMPLOYED AND UNEMPLOYED MEMBERS
OF UNEMPLOYMENT INSURANCE FUNDS
Thousands ofpersons.
UNEM¬
EMPLOYED PLOYED1
1961, 1st quarter (cid:9) 700 44
2nd quarter (cid:9) 7261 18
3rd quarter (cid:9) 736 12
4th quarter (cid:9) 727 26
1962, 1st quarter (cid:9) 712 46
2nd quarter (cid:9) 746 13
3rd quarter (cid:9) 753 9
4th quarter (cid:9) 744 23
1963, 1st quarter (cid:9) 699 70
2nd quarter* (cid:9) 748 19
3rd quarter* (cid:9) 761 9
1. Average of weekly returns.
2. Including a large number of workers on strike or lock-out.
3. Excluding one Fund with over 2,000 members which was included in theoilicial
statistics as from 1st April, 1963.
Source: Statistiskc Kfterretningcr.