Denmark's industrialized market economy depends on imported raw materials and foreign trade. Within the European Union, Denmark advocates a liberal trade policy. Its standard of living is among the highest in the world. Denmark devoted 0.82% of gross national income (GNI) in 2008 to foreign aid to less developed countries, including for peace and stability purposes, refugee pre-asylum costs, and for environmental purposes in central and eastern Europe and developing countries, making Denmark one of the few countries that are contributing more than the UN goal of 0.7 % of GNI to aid.

Denmark is a net exporter of food and energy. Its principal exports are machinery, instruments, and food products. The United States is Denmark's largest non-European trading partner, accounting for 4.4% of total Danish trade in 2008. Aircraft, computers, machinery, and instruments are among the major U.S. exports to Denmark. Among major Danish exports to the United States are industrial machinery, chemical products, furniture, pharmaceuticals, canned ham and pork, windmills, and plastic toy blocks (Lego). In addition, Denmark has a significant services trade with the U.S., a major share of it stemming from Danish-controlled ships engaged in container traffic to and from the United States (notably by Maersk-Line). There were 402 U.S.-owned companies operating in Denmark in 2007.

Like the rest of the world Denmark is affected by the global economic crisis. As of October 2009, unemployment was rising and private consumption had contracted significantly. Exports had fallen dramatically, also due to the devaluation of trading partners’ currencies, especially those of Sweden, Norway, and the U.K., but exports had stabilized at about 20% below previous levels. A contraction of GDP is expected in 2009, with estimates ranging from 3% to 5%. Denmark entered recession in mid-2007 before the onset of the global economic crisis, and the slowdown has been considerable. The Danish economy contracted by 1.1% in 2008 and 5.3% in the first half of 2009. In 2008, the budget surplus was $11.79 billion. In 2009 a deficit of $668 million is expected. Unemployment is relatively low at 6.4%, but up from 3% in June 2008, and is expected to peak just under double digits in early 2011. Most local observers agree that Denmark is on the path to a slow recovery and forecast economic growth from the 3rd or 4th quarter of 2009 onward.

In addition to the global crisis, Denmark has an underlying growth problem, and is projected to have the fourth-lowest productivity growth among Organization for Economic Cooperation and Development (OECD) countries in the decade to come; it dropped from sixth to twelfth place among the richest OECD nations from 1997 to 2007. Denmark has maintained a stable currency policy since the early 1980s, with the krone formerly linked to the Deutschmark and since January 1, 1999, to the euro. Denmark meets the economic convergence criteria for participating in the third phase (a common European currency--the euro) of the European Monetary Union (EMU), but the public deficit is expected to exceed the allowed 3% of GDP in 2010. Although a referendum on EMU participation held on September 28, 2000 resulted in a firm "no" and Denmark, therefore, has not yet adopted the euro, opinion polls show a majority now in favor of EMU. Another referendum on the EMU/euro is expected, though no sooner than 2011. Danes are generally proud of their welfare safety net, which ensures that all Danes receive basic health care and need not fear real poverty. However, at present the portion of working-age Danes (16 to 66-year-olds) living mostly on government transfer payments amounts to 22.6%. The heavy load of government transfer payments burdens other parts of the system. Health care, other than for acute problems, and care for the elderly and children have suffered, while taxes remain among the highest in the world. Thirty-two percent of the labor force is employed in the public sector.

Greenland
The public sector, including publicly owned enterprises and the municipalities, plays the dominant role in Greenland's economy. A large part of government revenues comes from Danish Government grants, 57% in 2009, an important supplement of GDP. The global economic slowdown is affecting Greenland as well, and a contraction of 2% of GDP is expected for 2009. The surpluses in the public budget between 2002 and 2005 were turned to a deficit of $40 million in 2007 and 2008, and unemployment is on the rise after an extended period from 2003 onward with lower unemployment. The Greenlandic economy increased by an average of 3% to 4% annually between 1993 and 2001, the result of increasing catches and exports of shrimp, Greenland halibut, and, more recently, crabs. However, it was not until 1999 that the economy had fully recovered from an economic downturn in the early 1990s. During the last decade the Greenland Home Rule Government (GHRG) has pursued a fiscal policy with mostly small budget surpluses and low inflation, but increased public pressure for improved public services in the form of better schools, health care, and retirement schemes have strained the public budget. The GHRG has taken initiatives to increase the labor force and thus employment by, among other things, raising the retirement age from 60 to 63 years. The average unemployment rate for 2008 was 4.5%. Structural reforms are still needed in order to create a broader business base and economic growth through more efficient use of existing resources in both the public and the private sector.

Due to its continued dependence on exports of fish, 85% of goods exports, Greenland’s economy remains very sensitive to foreign developments. Greenland has registered a foreign trade deficit since the closure of the last remaining lead and zinc mine in 1989, though international interest in Greenland’s mineral wealth is increasing. The trade deficit reached 12% of GDP in 2007. International consortia are also increasingly active in exploring for hydrocarbon resources off Greenland’s western coast, and there are international studies indicating the potential of oil and gas fields in northern and northeastern Greenland. The U.S. aluminum producer Alcoa in May 2007 concluded a memorandum of understanding with the Greenland Home Rule Government to build an aluminum smelter and associated power generation facility in Greenland to take advantage of abundant hydropower potential. Tourism also offers another avenue of economic growth for Greenland, with increasing numbers of cruise lines now operating in Greenland’s western and southern waters during the peak summer tourism season.

Politically, the Greenland Home Rule Government has sought increasing autonomy since the acquisition of home rule in 1979. In May 2003, the Danish and Greenland Home Rule governments reached agreement on a set of power-sharing principles on Greenland's involvement in Danish foreign and security policy. The so-called Itilleq Declaration provides that Greenland will have foreign policy involvement with a view toward having equal status on questions of concern to both Denmark and Greenland. A Danish-Greenlandic Commission, established in 2005 with the aim of preparing measures that would grant Greenland additional autonomy, issued its recommendations in early 2008 and set the conditions for a new legal framework, “Self Rule,” between Greenland and Denmark. The Self Rule agreement was overwhelmingly approved by Greenlandic voters in a referendum in November 2008 and was passed by the Danish parliament; it entered into effect on the 30th anniversary of Greenlandic Home Rule in June 2009. The new Self Rule agreement allows for the transfer of additional authorities, such as justice and police affairs, to Greenland’s government as it is able to assume financial responsibility for these new portfolios. The Self Rule agreement also provides formal international legal recognition to the Greenlanders as a people under international law, and provides a formula for division of potential oil and gas revenues between Denmark and Greenland.

Faroe Islands
In early 2008 signs of an impending slowdown in the Faroese economy became apparent. The main difficulty lay with the fishing industry coming under pressure from smaller catches combined with historically high oil prices. Though oil prices have come down, reduced catches of especially cod and haddock have strained the Faroese economy. GDP growth was 0.5% in 2007-2008, but inflation was 4.7%, leading to a drop in real GDP. A contraction in all sectors except the public sector is expected for 2009. The slowdown in the Faroese economy follows a strong performance since the mid-1990s, with annual growth rates averaging close to 6%, mostly as a result of increasing fish landings and salmon farming and high and stable export prices. Unemployment was insignificant and reached its lowest level at 1.2% in the first half of 2008 but increased to 3.3% in April 2009 and is rising. Most of the Faroese who emigrated in the early 1990s (some 10% of the population) due to the economic recession have returned. The positive economic development helped the Faroese Home Rule Government produce increasing budget surpluses that in turn helped to reduce the large public debt, most of it to Denmark. However, the total dependence on fishing and salmon farming makes the Faroese economy very vulnerable, and the surpluses turned to deficits in 2008; a deficit of $100 million is projected for 2009. Initial discoveries of oil in the Faroese area give hope for eventual oil production, which may lay the basis for a more diversified economy and thus less dependence on Denmark and Danish economic assistance. Aided by an annual subsidy from Denmark corresponding to about 6% of Faroese GDP, the Faroese have a standard of living comparable to that of the Danes and other Scandinavians.

Politically, the present Faroese Home Rule Government has initiated a process toward greater independence from Denmark, if not complete secession from the realm. In that respect, agreement on how to phase out the Danish subsidy plays a crucial role.

GDP (2008): $342.9 billion (current prices and exchange rates, source: Statistics Denmark).
Annual growth rate (real terms, 2008.): -1.1%.
Per capita GDP (2008): $62,015 (current prices and exchange rates).
Agriculture and fisheries (2.3% of GDP, 2008): Products--meat, milk, grains, seeds, hides, fur skin, fish and shellfish.
Industry (21.8% of GDP, 2008): Types--industrial and construction equipment, food processing, electronics, chemicals, pharmaceuticals, furniture, textiles, windmills, and ships.
Natural resources: North Sea--oil and gas, fish. Greenland--fish and shrimp, potential for hydrocarbons and minerals, including zinc, lead, molybdenum, uranium, gold, platinum. The Faroe Islands--fish, potential for hydrocarbons.
Trade (2008, goods): Exports--$114.892 billion: industrial production/manufactured goods 73.0% (of which machinery and instruments were 25.5%, and fuels, chemicals, etc. 13.3%); agricultural products and others for consumption 11.8% (pork and pork products 4.3% of total export); fish and fish products 2.1%. Imports--$109.727 billion: raw materials and semi-manufactures 42.6%; consumer goods 28.6%; capital equipment 11.6%; transport equipment 8.1%; fuels 7.9%. Major trade partners, exports--Germany 17.6%, Sweden 14.5%, U.K. 8.3%, Norway 6%, U.S. 5.5%, Holland 4.4%. Major trade partners, imports--Germany 21.2%, Sweden 14.2%, Holland 6.8%, U.K. 5.2%, Norway 4.7%, U.S. 3.2%.
Official exchange rate: 5.0986 kroner=U.S. $1 (2008 average).