RTTNews - The Danish economy is set to shrink 2.9% this year, after a 1.1% contraction in 2008, the Danish Economic Council, otherwise known as the Wise Men said in a report on Thursday. This would be the biggest decline since 1950s.

Next year, the economy is expected to expand just 0.1%. In 2011, the GDP is forecast to rise 1.1%.

To achieve the desired increase in GDP growth between 1/2 and 3/4 percentage points in 2010 public investment should be increased by DKK 15 billions, the council said.

The council painted a gloomy picture of the Danish labor market. They expect unemployment to climb to 165,000 by 2011. The level was at a historic low of around 47,000 in the middle of 2008. In the worst scenario, the unemployment is seen at 200,000 persons by 2011.

The jobless rate is forecast to jump to 3.4% this year from 1.8% in 2008. Going forward, the rate is seen surging to 4.9% in 2010 and to 5.7% by 2011.

Exports as well as domestic demand are expected to decline further, the report said. Tax breaks in 2010 will stimulate private consumption in the years to come, the council said.

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