China's Dagong Global Credit Rating Co. Ltd. on Monday downgraded the local and foreign currency sovereign credit rating of Denmark from AAA to AA+, with a stable outlook.

The Danish economy is lacking momentum after the country's real estate bubble burst during the global financial crisis, and to a certain extent, its economic growth relies an expansionary fiscal policy, leading to a higher deficit rate, the rating agency said in a report.

Given the sluggish domestic demand, the agency predicted Denmark's economic growth will maintain a lower level of growth at 1.4 percent in 2011 and 1 percent in 2012. In the long-run, an aging population and low increase in labor productivity will constrain the growth of the Danish economy.

Dagong said the Danish government has to rely on a large-scale fiscal deficit policy to stabilize its economy. It forecast the fiscal deficit rate will be 4 percent in 2011 and 4.2 percent in 2012. As a result, the debt burden rate will rise to 46 percent in 2011 and 48 percent in 2012.

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