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.