March 15, 2017 / 11:29 AM / 3 years ago

UPDATE 1-"Moderate" Danish boom could be accelerated with reforms

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By Teis Jensen

COPENHAGEN, March 15 (Reuters) - The Danish economy is steadily heading towards a “moderate boom”, but if growth is to be accelerated, new reforms are needed to increase the labour supply or productivity, the central bank said on Wednesday.

The central bank raised its forecasts for Denmark’s economic growth slightly to 1.6 percent this year and next year, above the 1.1 percent the economy grew last year.

“The Danish economy is heading towards a moderate boom with gradually intensifying labour market pressure,” it said.

It said the forecast assumed that labour supply would increase as a result of reforms already implemented, but that the high growth rates seen in earlier booms were not likely to return.

“We are not where we were in 2007. But we do see an increasing pressure in some sectors, not least in the construction sector where the unemployment is low and more and more companies are saying that their production is limited due to lack of labour,” governor Lars Rohde told reporters.

The primary domestic risks hinge on whether it will be possible to attract sufficient labour to meet the growing demand over the coming years, the central bank said.

“Fiscal policy should not stimulate demand further. If growth is to be accelerated, new reforms are needed to increase the labour supply and/or productivity, but the potential is limited,” it said.

It said a small further increase in the retirement age could provide a substantial contribution to the labour force in the future.

“This also applies if the immigrant participation rate is increased or more qualified labour is attracted from abroad,” he said.

Economy Minister Simon Emil Ammitzboll has called for urgent job reforms to avoid a workforce shortage. The liberal minority government will work throughout the remainder of the year to try and get a majority in parliament for its proposals. (Editing by Alison Williams)

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