Danish govt suggests scaling down investments to help struggling households

COPENHAGEN (Reuters) -Denmark’s government on Wednesday suggested putting infrastructure projects on pause and instead using the money to help Danes cope with rising inflation.

The Nordic nation of roughly 6 million people has seen the biggest drop in real wages since the 1950s and lawmakers have already approved several measures to help households struggling with rising living costs.

“I don’t bring any gifts,” Finance Minister Nikolai Wammen told journalists as he presented his government’s budget proposal for 2023.

“The task is to find a balance between not overheating the economy, as well as allocating help to those who need it and also invest in the healthcare system,” he said.

In its proposal for next year’s spending, which it dubbed an “inflation budget”, the government sets aside a reserve of around 2 billion Danish crowns ($268.6 million) to cushion the impact of rising prices.

The Social Democratic minority government, led by Prime Minister Mette Frederiksen, has been looking for ways to boost support after it has been trailing in recent opinion polls.

The deadline for the next election is June 4 next year, but one of the parties backing the government has said it would withdraw its support if a general election is not called before Oct. 4 when parliament convenes after the summer.

It also presented new economic forecasts. Denmark’s economy is now expected to grow by 2.8% this year, down from a previous forecast of 3.4.

Next year, GDP is seen growing 0.8% compared to the 1.9% the forecasted in May, the ministry said in an economic report.

“Even though uncertainty and unpredictability has become a regular travelling companion, the Danish economy stands with firm ground under its feet,” Wammen said in the report, referring to healthy public finances and low unemployment.

The ministry expects inflation of 7.3% this year, up from its May forecast of 5.2%, and 3.3% next year.

($1 = 7.4461 Danish crowns)

(Reporting by Stine Jacobsen and Jacob Gronholt-Pedersen, editing by Terje Solsvik and Emelia Sithole-Matarise)

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