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UPDATE 1-Denmark's economy swings to growth in Q3

Published 12/22/2009, 06:34 AM
Updated 12/22/2009, 06:36 AM

* GDP +0.6 pct qtr/qtr, -5.2 pct yr/yr

* Follows on 4 consecutive quarters of contraction

* Exports and private and public spending boosted

* Analysts see growth in 2010 but also growing unemployment

COPENHAGEN, Dec 22 (Reuters) - Denmark's economy, hit by the worst recession since World War 2 amid the global economic downturn, swung to growth in the third quarter from the previous due to growing exports and consumption.

The small Nordic country's export-dependent economy grew 0.6 percent quarter-on-quarter for a year-on-year drop of 5.2 percent, the statistics office said on Tuesday.

The country last saw its gross domestic product grow in the second quarter of 2008, on an annual basis as well as monthly.

"The numbers show that we, a small open economy, benefit from the recovery abroad. At the same time, we also see signs domestic demand is after all improving slightly, said Christian Heinig, economist at Sydbank.

The median estimates in a Reuters survey of economists had been for a monthly 0.1 percent increase and a yearly 5.6 percent drop. [ID:nGEE5B110F]

Denmark's centre-right government has launched several measures, including income tax cuts, to stimulate the economy. Substantial drops in interest rates are also expected to boost the Danes' confidence and spending next year.

Analysts said they expected the economy to continue to recover although the crisis was not over, with unemployment expected to continue to rise for some time yet.

"The feeling of crisis is often linked to the development in the labour market and here the outlook is still black," said Steen Bocian, economist at Danske Bank.

Private as well as public consumption rose in the quarter while investments fell. Imports grew, although less than exports.

"The statistics office delivered this year's first Christmas gift. Today's figures are good news for the Danish economy," said Helge Pedersen, economist at Nordea.

He said the rise would hopefully continue in the fourth quarter.

"Considering expectations for big improvements in households' purchasing power, ... big announced increases in public investments and a better international economic climate which will help exports, we still see growth in 2010 of around 1.5-2 percent."

The office revised up second-quarter GDP to a 1.4 percent quarterly contraction compared with an initial reading of minus 2.6 percent, and to a 7.1 percent yearly contraction versus an initial reading of minus 7.2 percent.

In 2008, the Danish economy shrank 0.9 percent. (Reporting by Anna Ringstrom, additional reporting by Henriette Jacobsen and Ole Mikkelsen; Editing by Andy Bruce)

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