How are scores of Americans trying to lose weight affecting Danish monetary policy? The answer isn’t as complicated as it may seem.
Driving the news: Novo Nordisk, the Danish producer of blockbuster drugs Ozempic and WeGovy, has pumped so much of its profit into Denmark’s economy this year that it has single-handedly inflated the value of the Danish krone and impacted interest rate decisions.
- The success of Novo Nordisk’s obesity drugs has made it Europe’s second-most valuable company, earning a market cap larger than its home country’s GDP.
To keep the krone pegged to the euro—a policy directive meant to keep inflation levels steady with other EU countries—the central bank has held the world’s second-lowest interest rates to suppress its value.
Yes, this is all happening because of the weight-loss drug with the streetcar ad.
Zoom out: Drugmakers now make up 5% of the Danish economy and added ~2% of growth to Denmark’s GDP between the end of 2021 and Q1 of 2023, per Sydbank. One economist told CNN that Denmark has “done better than almost any other European economy [post-pandemic],” largely thanks to the pharma industry.
- But Denmark’s pharma fortunes are papering over deficiencies. Without Big Pharma, Denmark’s GDP would have fallen by 1% over that same period.
Bottom line: It’s rare for a single company to contribute so much to an advanced economy. It’s also dangerous. One economist warned Bloomberg that Novo could become “Denmark’s Nokia” if the boom times stop—a reference to Finland’s over-reliance on the telecom in the ‘90s and 2000s, and how its economy fell into crisis mode when the company declined.—QH