COPENHAGEN Jan 20 Denmark needs to bolster productivity through structural reforms after lagging the world's leading economies over the last two decades, the OECD said in a country survey published on Monday.
The Paris-based Organisation for Economic Cooperation and Development forecast Danish gross domestic product to grow by 1.6 percent this year and by 1.9 percent next year, unchanged from its previous estimates in November.
The Danish government said last month it also expected economic growth of 1.6 percent in 2014 and 1.9 percent in 2015.
The economy has grown little since 2010 following the global economic crisis and the bursting of a housing market bubble.
"Renewing with stronger productivity growth over the longer run is an overarching challenge for Denmark and calls for keeping up structural reform efforts," the OECD report said.
Like its Nordic neighbours Sweden, Finland and Norway, Denmark has long taken pride in a generous welfare system rooted in egalitarian social policies.
But the high costs, which will rise further as the population ages, along with the need to reduce taxes to make their economies more competitive have brought pressure for change.
The Danish economy is set to recover gradually as global trade regains momentum and confidence improves, the OECD said.
"However, household debt is high and there remain fragilities in the financial sector, which entail risks for private consumption and public finance," it said.
The organisation said the share of deferred-amortisation mortgage loans is too high for comfort and suggested that Denmark create a new supervisory tool for mortgage banks, similar to the framework for banks, including thresholds on the share of deferred-amortisation loans and refinancing needs.
The OECD also urged a lowering of marginal taxes on higher incomes as these are seen as detrimental to economic growth. (Reporting by Teis Jensen and Ole Mikkelsen; Editing by Gareth Jones)