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UPDATE 3-Denmark slides deeper into recession than expected

Published 09/30/2009, 10:25 AM
Updated 09/30/2009, 10:27 AM
DANSKE
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* Q2 GDP drops 7.2 pct yr/yr vs Rtrs poll forecast -5.3 pct

* Adjusted Q2 GDP falls 2.6 pct q/q vs -0.8 percent forecast

* FinMin says govt ready to take further action if needed

* Economists say they will lower their 2009 GDP forecasts

(Adds finance minister and economist quotes, details)

By John Acher and Peter Levring

COPENHAGEN, Sept 30 (Reuters) - The Danish economy slid much deeper into recession than economists expected in the second quarter, shrinking 7.2 percent year-on-year, official data showed on Wednesday.

Some economists called it a record plunge, though Statistics Denmark would only confirm it was the steepest fall since 1991 when comparable quarterly GDP data began to be compiled.

Denmark's foreign trade-dependent economy has been hit hard by the global economic downturn, suffering its deepest recession in more than four decades.

The drop, Denmark's fourth consecutive quarter of negative growth, exceeded eight economists' median expectation of a 5.3 percent fall in a Reuters survey.

"It looks really, really bad," Danske Bank chief economist Steen Bocian told Reuters. "It is likely that this is the worst situation since the Second World War, and we would have to go back to the 1930s to find anything comparable."

Finance Minister Claus Hjort Frederiksen said: "The national accounts through the month of June confirm that the crisis has hit Denmark hard. Especially exports and investments have surprised negatively."

"We will continue to watch the development carefully and are prepared to intervene with further measures if it proves to be necessary," Frederiksen said in a brief statement to news media.

But Frederiksen said there were also some encouraging signs.

"Consumption and exports are recovering, and things are going better with the world economy. At the same time, marked fiscal policy intervention and very low interest rates will have a powerful effect from now on," the minister said.

Bocian said the weak second-quarter data pointed to a full-year 2009 GDP drop of between 4.5 and 5 percent and that Danske Bank was likely to cut its forecast next week "to something like minus 4.5 percent".

The government's 2009 GDP forecast is for a decline of 3.0 percent, and in mid-September the central bank cut its forecast to negative 3.2 percent from a previous minus 2.5 percent, but it forecast a recovery to 0.9 percent growth in 2010.

2009 CONSENSUS CHALLENGED

"Consensus on Danish GDP in 2009 has been for a drop of between 3 and 3.5 percent, but from these numbers it looks more like a drop of 5 percent," Jyske Bank senior economist Niels Ronholdt said in a note to clients.

Seasonally-adjusted GDP dropped 2.6 percent in the second quarter from the first quarter, against economists' median estimate of a 0.8 percent drop in the Reuters survey.

"The drop is much bigger (quarter-on-quarter) than we had expected, almost an entire percentage point," Bocian said.

Investment tumbled, private consumption fell, and the downturn in foreign trade persisted with a marked decline in both imports and exports, Statistics Denmark said .

Second-quarter fixed investment dropped 10.3 percent quarter-on-quarter and 16.3 percent year-on-year. Exports were down 13.6 percent from a year ago and down 4.5 from the first quarter.

First-quarter GDP was revised to a contraction of 3.4 percent from a drop of 4.1 percent reported in June.

The value of Danish GDP in the second quarter fell to 408.3 billion Danish crowns ($79.90 billion).

The Danish crown softened to 7.4438 to the euro by 1350 GMT from 7.4432 before the data. (Editing by Andy Bruce)

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