Danmarks Nationalbank
Danmarks Nationalbank
09/24/2025 | Press release | Distributed by Public on 09/24/2025 01:03
Higher defence spending may increase capacity pressures moderately
Analysis
Economic activity
24 September 2025 No. 19
Analyses focus on current issues of particular relevance to Danmarks Nationalbank's objectives. The analyses may also contain Danmarks Nationalbank's recommendations. They include our projections for the Danish economy and our assessment of financial stability. Analyses are targeted at people with a broad interest in economic and financial matters.
Higher defence spending may increase capacity pressures moderately
Russia's invasion of Ukraine has prompted Denmark and other European countries to significantly boost their military spending. A scenario analysis suggests that meeting the new NATO target of 3.5 per cent of GDP in core defence spending from 2026 onwards may add moderately to capacity pressures in the Danish economy over the next few years. The impact on capacity pressures will depend on several factors including how quickly defence spending is increased and how much of the funds will be spent abroad.
Key messages
Why is this important?
Russia's invasion of Ukraine in 2022 and increased geopolitical tensions have raised concerns about European defence capabilities, prompting Denmark and some other European countries to increase their military spending significantly. Understanding the potential implications of higher defence spending for the Danish economy supports Danmarks Nationalbank's main objective of price stability.
Main chart
Defence spending has increased in several European countries
Note:
The new NATO target is 3.5 per cent of GDP in core defence spending plus 1.5 per cent of GDP in broader security-related expenditures by 2035. Data for 2025 is a NATO estimate. German data is not available for 2025.
Source:
Macrobond and NATO.
Photo below: Jens Dresling/Ritzau Scanpix.
Danmarks Nationalbank published this content on September 24, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on September 24, 2025 at 07:03 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]