Denmark retains its Aaa credit rating, but its long-term growth prospects are a cause for concern, ratings agency Moody's said late Thursday.

"The government's top-notch ratings reflect Denmark's stable macroeconomic and political environment and relatively healthy government balance sheet," Moody's said in a statement. It added that Denmark's rating outlook remains "stable."

The triple-A rating, the highest possible, appears to confirm Denmark's status as a relatively better economic performer during the ongoing European debt crisis.

Moody's said Denmark's diversified economic base, which includes agriculture, oil and gas production, and trade and services, has helped support its economy which was worth over 300 billion U.S. dollars in 2010.

"The country's long-term economic strength is less impressive, however, given the weak growth performance in the past decade, although incomes did benefit from favorable trends in the terms of trade," the agency said.

It pointed to Denmark's aging population, and decline in oil and gas revenues from its North Sea fields, as constraints to future growth. It added that Denmark's welfare system is "becoming less affordable" as "debt to GDP ratios have climbed sharply."

"Currently the cost of debt service is easily manageable, given the low level of European interest rates, but with policy rates headed higher, interest payments on the increased debt burden will climb as well," Moody's said.

Moreover, there is a chance that large, unexpected credit events could negatively affect the country's Aaa rating given "the extremely large scale of the financial system relative to the size of either the government or GDP."

In its latest six-monthly economic forecast published Tuesday, the Danish government said its public deficit will rise to 100.7 billion Danish kroners (17.75 billion U.S. dollars) in 2012.

But Moody's praised the center-left Danish government's commitment to structural reforms from early 2012, pointing especially to ongoing reform of the state-funded early-retirement pension system.

The Danish deficit is forecast to fall to 48 billion kroners (8.5 billion dollars) in 2013, equal to 2.6 percent of its GDP, the government said, which would bring it under the 3 percent deficit target for EU member states.

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