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      Scope completes monitoring review for Kingdom of Denmark
      FRIDAY, 06/05/2022 - Scope Ratings GmbH
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      Scope completes monitoring review for Kingdom of Denmark

      Monitoring review announcement

      Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

      Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

      Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

      Scope completed the monitoring review for the Kingdom of Denmark (AAA/Stable; S-1+/Stable) on 3 May 2022.

      This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com.

      Key rating factors

      The Kingdom of Denmark’s long-term AAA/Stable ratings are underpinned by the following credit strengths: i) the country’s wealthy and competitive economy; ii) sound public finances and a low level of public debt; iii) a solid external position driven by consistent current-account surpluses; and iv) a strong institutional framework and stable governance. These factors increase the country’s resilience to economic shocks, including from the Covid-19 pandemic and rising inflationary pressures following the Russia-Ukraine war, and they provide the government with fiscal space to support the economy with countercyclical fiscal measures.

      Challenges relate to: i) vulnerabilities in the Danish financial system, including from high levels of household debt; and ii) banking sector vulnerabilities related to high and rising property prices. Rising interest rates are likely to dampen house price growth in Denmark. A sharp correction in the housing market could weigh on consumption and result in spill-over effects in Denmark’s highly interconnected financial system of mortgage credit institutions, pension funds and insurance companies.

      The Stable Outlook reflects Scope’s view that risks to the ratings are balanced over the next 12 to 18 months.

      The rating/Outlook could be downgraded if, individually or collectively: i) a severe economic shock resulted in a material decline in medium-term growth prospects; ii) the fiscal outlook deteriorated, resulting in a significant upward trend in government debt-to-GDP ratios; and/or iii) banking system risks increased and resulted in broader systemic risk, leading to the materialisation of contingent liabilities on the government’s balance sheet.

      For the updated report accompanying this review, click here.

      The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Ratings Methodology, 8 October 2021) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
      This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
      Lead analyst: Eiko Sievert, Director

      © 2022 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Analysis GmbH, Scope Investor Services GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin. 

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