The National Bank of Denmark published an analysis of how Danish companies’ expanding production abroad, both through foreign subsidiaries and through merchanting and processing arrangements, affects Denmark’s current account and the measurement of productivity and competitiveness. It finds that income from these international activities has become a larger contributor to national income and the current account surplus, and that Danish manufacturing shows overall indications of good productivity and competitiveness, although outcomes differ materially across industries. Processing exports rose from 1.3 to 3.1 per cent of GDP in the years up to 2021 to 8.2 per cent of GDP in 2024, with a net trade balance contribution of 6.6 per cent of GDP in 2024, while merchanting reached 2.2 per cent of GDP in 2023. Net returns from corporate foreign direct investment almost doubled as a share of GDP over 2010 to 2024, and merchanting and processing together with royalties accounted for 36 per cent of manufacturing value added in 2023. The analysis argues that profits from foreign production often help fund Danish-based employees and intellectual property, citing that in manufacturing processing income in 2023, wages for foreign labour were around 12 per cent of total value added, and that mechanically excluding merchanting and processing would materially reduce measured profitability for affected firms. Activity is concentrated among relatively few large firms, with around 2,300 companies involved in international production and only about 120 exporting via merchanting or processing, while the top 10 per cent of merchanting and processing exporters accounted for 89 per cent of such exports in 2023. The bank also flagged a forthcoming analysis on the increasing importance of the largest companies, scheduled for 19 March.
National Bank of Denmark 2025-03-11
National Bank of Denmark analysis shows overseas processing exports reached 8.2% of GDP in 2024 and are increasingly driving Denmark’s current account surplus
The National Bank of Denmark's analysis highlights the impact of Danish companies' foreign production on the current account and national income, with processing exports rising to 8.2% of GDP in 2024. Merchanting and processing, along with royalties, contributed 36% to manufacturing value added in 2023, with profits from foreign activities supporting domestic employment and intellectual property. The study notes that a small number of large firms dominate international production, with the top 10% of exporters accounting for 89% of merchanting and processing exports in 2023.