June 30, 2017 / 10:55 AM / 2 years ago

UPDATE 1-Danish businesses face labour shortage as economy picks up

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COPENHAGEN, June 30 (Reuters) - The Danish economy performed better than expected in the first quarter and last year, revised figures showed on Friday, highlighting the need for reforms to avoid labour shortages, business lobby groups said.

Denmark’s gross domestic product grew 2.6 percent in the first quarter from the same quarter last year, up from a May reading of 2.2 percent, outpacing growth in the euro zone and in the United States.

Economic growth in 2016 was also revised up to 1.7 percent from 1.3 percent, putting last year’s growth almost in line with the two previous years.

Businesses in the export-driven economy have seen an increase in orders, but about a quarter of companies surveyed by the Confederation of Danish Industry (DI) said they had lost sales or orders because they could not recruit enough employees.

“This means focus should be on avoiding overheating the economy. That requires both a tight fiscal policy and reforms to extend the growth potential for the economy,” said chief economist Steen Bocian at The Confederation of Danish Enterprise (DE), another lobby group.

“As reforms take time to implement, now is the time to react,” he said.

More than every third company has unsuccessfully tried to recruit employees within the past year, the DI survey of 3,335 companies showed on Friday.

Denmark’s right-leaning government is seeking to entice people into work through pension reforms and tax cuts but it may prove difficult to persuade its powerful ally, the Danish People’s Party (DF), to back its plans.

The government holds only 53 seats in parliament and has to negotiate with other parties, most often the populist DF, to secure the 90 votes necessary to pass laws.

The government said last month it expected growth this year to be around 1.7 percent, up from an earlier forecast of 1.5 percent, but said it wanted to implement reforms that could boost the rate to 2 percent per year.

In November, a major revision of economic data painted a much brighter picture of Denmark’s growth in recent years.

Reporting by Teis Jensen; Editing by Jacob Gronholt-Pedersen and Janet Lawrence

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