Carl-Johan Dalgaard, the chief economic advisor and professor at the University of Copenhagen, is urging Danish politicians to exercise caution when considering how to spend the country’s recently increased economic leeway. He warns against freely allocating these funds due to the inherent uncertainties in economic forecasts.

In an interview, Dalgaard highlighted the risk that the Danish economy could perform worse than projected, leading to a reduction in future tax revenue estimates.

Over the past few years, the government has significantly increased its economic leeway projections by over DKK 100 billion towards 2030. The most recent adjustment, in June, saw the leeway, representing the state’s anticipated surplus, rise by DKK 58 billion for the same period.

Dalgaard expressed his surprise at the magnitude of the DKK 58 billion upward revision, even though he anticipated an increase. He emphasized that the leeway calculations are based on average estimates, with an equal chance of actual figures being lower or higher.

He cautions against the perception that the economic leeway will consistently grow. He points out that factors like the current high employment rate are subject to change. Should the leeway be allocated to other priorities, the government might face the difficult decision of raising taxes or implementing savings measures in the future.