Statistical news focuses on the latest figures and trends in Danmarks Nationalbank’s statistics. Statistical news is targeted at people who want quick insight into current financial data.
Record-high direct investments abroad
Danish companies' direct investments abroad reached a new record level of kr. 1,749 billion at the end of 2023. The value of foreign direct investments in Denmark was kr. 887 billion in 2023. This is shown by Danmarks Nationalbank's annual statistics on the value of inward and outward direct investments. The increase of Danish foreign direct investments abroad in the recent years is mainly due to investments made by pharmaceutical companies and large industrial companies. The increase has occurred, even though in the past two years Danish companies have simultaneously had large write-offs on investments abroad – for example Carlsberg's involvement in Russia and Ørsted's write-offs on wind farms in the USA.
The value of Danish direct investments abroad rose to DKK 1,749 billion in 2023
Note:
Stock of direct investments excluding pass-through investments calculated according to directional principle where intercompany debt is calculated on net basis.
Large balance of payments surpluses are invested abroad
For Denmark, the value of outward direct investment exceeds the value of inward investment. In other words, Denmark has built up a positive net stock of direct investments compared to the rest of the world. The difference between outward and inward direct investment must be seen in the context of the large Danish balance of payments surpluses. A similar picture applies for the countries with which Denmark normally compares itself. Countries which have had surpluses on the current account balance for several years, i.a. Germany and the Netherlands, at the same time, have also built up large net holdings of direct investment. Conversely, countries with a balance of payments deficit, i.a. USA and Great Britain are characterized by inward direct investment exceeding outward investment.
Outward investments are concentrated on trading partners
Danish direct investments abroad are distributed among relatively few countries and are particularly concentrated in the countries with which Denmark has significant trade relations. These are the European countries, the USA, Singapore and China. The ten largest investment countries together account for 69 per cent of Danish investments abroad.
The largest direct Danish investments go to the USA and Europe
Note:
Stocks at the end of 2023 are calculated according to the directional principle and excl. pass-through investments. The light gray areas mark countries for which data is collected but not published.
The value of investments in Europe will make up 60 percent of total outward investments in 2023. This is a smaller share than 5 years ago, as Danish companies have invested heavily in the USA and Asia in recent years. The value of Danish investments in the USA was kr. 274 billion in 2023, which is almost twice the amount of 2018. The USA is the largest investment country, followed by Great Britain, Germany and Sweden.
The USA is the largest investor country in Denmark
Foreign direct investments in Denmark often pass through one or more transit countries before they reach Denmark. This is due, among other things, to complicated ownership structures, where investments from the country of origin are made via holding companies, often based in transit countries such as Luxembourg, the Netherlands and Ireland.
The complexity of the global organization of companies can make it difficult to identify where economic activity takes place and which countries ultimately bear the risk and get the return on the investment. Therefore, the investments are also compiled based on the ultimate investor country, where there is look through of ownership structures and the country from which the investments are controlled is identified. Based on this approach the USA is clearly the country that ultimately invests the most in Denmark, but Sweden and Great Britain are also major investor countries. Part of the foreign direct investment in Denmark also comes from Danish companies – known as round tripping. This occurs when Danish companies and foundations invest in Denmark through a foreign subsidiary.
Direct investments often go via transit countries, but ultimately the USA is the largest investor in Denmark
Note:
Stock at the end of 2023 calculated according to the directional principle excluding pass-through holding companies.
High returns on Danish investments abroad
The return on Danish direct investments abroad is higher than the return on foreign investments in Denmark. Since 2015, the average annual return on Danish investments is 7.6 per cent, while the return on foreign investments in Denmark is 6.1 per cent. Most of the difference is connected to the fact that Danish pharmaceutical companies have a high income from foreign subsidiaries. Leaving aside the pharmaceutical industry there is far less difference between the return on outward and inward direct investment.
The return on direct investments has been relatively stable since 2008. In recent years, for example, high freight rates have contributed to a relatively high return on outward investments, while the high return on inward investments in 2022 is linked to high earnings in energy trading companies.
The return on outward direct investment is greater than on inward investment
Note:
The return on equity investments is calculated based on the operating results in the accounts of the companies and is cleaned for one-off income and expenses. The rate of return for equity investments is calculated as the asset income divided by the average monthly stocks. As something new, the annual data for returns can be found in the tables DNFDIOUC and DNFDIINC.
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Why is direct investment important?
Direct investments are investments in foreign companies and branches where the investor holds at least 10 per cent of the equity or voting rights in the company. Direct investments typically have a longer horizon and are often made with a view to a lasting financial connection between the investor and the company.
The investments can be an indicator of economic integration and of how open an economy is. Direct investments can, for example, stimulate local real economic activity in the form of increased production and employment in the country in which the investment is made. The purpose of the investment can, among other things, be to create value added through active ownership, for example if the investor has expertise in developing the company. The investments can also be made with a view to taking over and gaining access to, for example, the distribution network and customer base or intellectual competences or patents.
Denmark has larger direct investments abroad than foreign countries have in Denmark. It should be seen in the context of Denmark's large balance of payments surpluses. Denmark also has a higher return on investments abroad than foreign investors have on investments in Denmark. Direct investments are therefore becoming increasingly important for Danish incomes and thus for Danish consumption and investment opportunities.
Audit note
In accordance with Danmarks Nationalbank's audit policy, we have carried out an ordinary audit for 2023 with this publication. In 2023, outward direct investments excl. pass-through investments revised up by kr. 6 billion, while inward investments have been revised down by kr. 33 billion.