Danish government suggests cutting investment to help struggling households

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COPENHAGEN, Aug 31 (Reuters) – The Danish government on Wednesday suggested shelving infrastructure projects and instead use the money to help Danes cope with rising inflation.

The Nordic nation of around 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 the rising cost of living.

“I bring no gifts,” Finance Minister Nikolai Wammen told reporters when presenting his government’s draft budget for 2023.

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“The task is to find a balance between not overheating the economy, allocating aid to those who need it and investing in the health system,” he said.

In its spending proposal for next year, which it has called an “inflation budget”, the government sets aside a reserve of around 2 billion Danish kroner ($268.6 million) to cushion the impact of the price increase.

The minority Social Democrat government, led by Prime Minister Mette Frederiksen, has been looking for ways to build support after lagging in recent opinion polls.

The deadline for the next election is June 4 next year, but one of the parties supporting the government has said it will withdraw its support if a general election is not called by October 4, when the Parliament will meet after the summer.

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

Next year, GDP is expected to grow 0.8 percent from the 1.9 percent forecast in May, the ministry said in an economic report.

“Even though uncertainty and unpredictability have become regular travel companions, the Danish economy is solid underfoot,” Wammen said in the report, referring to sound 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 kroner)

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

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