Copenhagen:  Denmark proposed yesterday to save about $4.0 billion (Dh14.7 billion) over the next three years as a step to restoring fiscal balance and lowered its estimate for its 2010-11 public sector deficits as recovery takes hold.

The budget consolidation will involve reducing public investment from unusually high 2009-10 levels and freezing public expenditure growth by, among other things, halting automatic adjustments to pension and other social benefits and suspending some tax reform plans, the government said.

Prime Minister Lars Lokke Rasmussen told a news conference the recovery package would take Denmark out of the crisis "with the bill paid".

"The idea is to get the Danish economy back on track," he said.

The centre-right government, which faces an election by November 2011 at the latest, also nudged up its economic growth forecasts for 2010-11 and lowered its unemployment projection.

"The Danish economy has escaped the downturn that followed the escalation of the financial crisis in September 2008," the finance ministry said in a statement, adding that it expected the expansion to continue.

Drivers

"This year, growth is primarily driven by the exceptionally expansionary monetary and fiscal policies, while it is expected to become more self-sustainable next year," the ministry said.

The government bumped up its forecast for 2010 gross domestic product growth to 1.4 per cent from a previous estimate of 1.3 per cent and its 2011 GDP growth forecast to 1.7 per cent from a projection of 1.6 per cent given in Dec-ember.

The government lowered its estimate of the public sector deficit this year to 88.2 billion crowns (Dh53.79 billion) from a December projection of 94.4 billion, and said the deficit would equal 5.1 per cent of gross domestic product (GDP) instead of an earlier 5.5 per cent.

It trimmed its estimate of the 2011 public sector deficit to 78.6 billion crowns from an earlier figure of 79.0 billion, and said the deficit would fall to 4.4 per cent of GDP.

The government cut its forecast for unemployment this year to 4.5 per cent and 4.7 per cent in 2011 versus an earlier forecast of 5.3 per cent for both periods, with the lower prognosis contributing to lowering the deficit.