Novo Nordisk’s Wegovy and Ozempic boom saved Denmark’s GDP from a no-growth 2023

The success of Novo Nordisk A/S’s weight-loss and diabetes drugs is poised to spur an acceleration of Denmark’s growth after the pharmaceutical industry helped it avoid an economic contraction in 2023, according to analysts at the country’s largest bank. 

Danske Bank A/S now expects the Danish economy to expand 2.1% this year, up from a previous estimate of 1%, and higher than all other forecasts compiled by Bloomberg. The Nordic country’s 1.8% growth in 2023 would have been completely erased without the contribution from the pharmaceutical industry, as Novo Nordisk, which has grown to become Europe’s most valuable company, is ramping up production to keep up with demand for its blockbuster Wegovy and Ozempic drugs.

“It does not look like Novo Nordisk is slowing down, and in the rest of the economy, we are also seeing some more growth,” the bank said in its Nordic Outlook report published Tuesday. “Other types of manufacturing are gaining, consumer spending should benefit from higher real incomes and improving sentiment, and construction from lower interest rates.”

Danske Bank is also painting a brighter picture than most other forecasters on Sweden’s economic prospects. The largest country in the region will see a manufacturing-cycle recovery pull the export-oriented economy out of its current slump, according to economists, who expect Swedish output to grow by 1.5% this year. 

Danske had previously expected a 1.3% expansion in 2024, and has become slightly more upbeat as it sees an improvement in the outlook for domestic consumption coinciding with an expansion that will be led by the country’s manufacturing sector. 

”Goods exports will be helped by a positive shift in inventory management, at the same time as a recovery in household consumption should offset continued weak domestic investments,” chief economist Michael Grahn said. “We are heading toward brighter days.”

The gap between companies’ order intake and their stocks has decreased globally, and hence, even a moderate increase in demand should lead to replenishments, Grahn said in the report. “This development is even more forceful in Sweden, which is often leading the manufacturing cycle as a result of its export-intensive industry.”

The Swedish economy could also be helped by lower borrowing costs as inflation decelerates. The Riksbank has said it could cut rates as early as in the first half of this year, and Danske Bank expects a first easing move in June, taking the benchmark rate to 3.75% from 4%. 

“The coming monetary policy easing will diverge from the typical pattern of rapid and forceful cuts as the economy is entering recession.” Grahn and co-writer Gustav Sunden said. “In this situation, it is more about gradually adjusting the rate at a reasonable pace — 25 basis points a quarter — to a reasonable level, about 2% at end-2025, as the economy will undergo a modest recovery.” 

Danske Bank’s Nordic GDP Forecasts:

  2024 2025
Denmark 2.1% (1.0%) 2.0% (1.6%)
Finland -0.4% (0.3%) 1.9% (1.9%)
Norway*  1.1% (1.1%) 2.1% (2.1%)
Sweden 1.5% (1.3%) 2.0% (1.8%)
*mainland economy
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