Denmark’s economy recovered swiftly from the COVID-19 crisis and proved resilient to disruptions following the energy crisis and Russia’s war of aggression against Ukraine in 2022, although growth is now slowing (Figure 1.1). Despite surging commodity prices and weaker activity in main trading partners, industrial growth has been strong, driven by a small number of high value activities and services have fully recovered from the pandemic. Living standards remain high. Employment reached a record level, including for groups that historically have had integration difficulties. Decisive and targeted policy responses contributed to this good performance, while keeping public finances sound. Policy initiatives contributed to preventing energy shortages by diversifying supply sources, encouraging savings, and supporting green investment. The current slowdown of the economy should reduce risks of overheating and dampen inflation, but it also masks large disparities. The Danish economy has been running at two speeds, with most of GDP growth driven by the pharmaceutical sector (Figure 1.1, Panel B). Productivity growth has been uneven across sectors and supported by multinational firms producing abroad. Ambitious targets for the decarbonisation of the economy have been set out, including reaching net neutrality by 2045. While Denmark made substantial progress in the design of efficient climate change mitigation policies, further action is needed to encourage technological advancements and greater emission reductions across sectors.