The Danish government reduced its economic growth projection for 2025 from an earlier estimate of 3% to just 1.4%, citing deteriorating prospects at pharmaceutical giant Novo Nordisk as well as new tariffs placed on Danish exports going to the United States.
In a Friday statement, the Ministry of Economy stated that the decline in expectations is due to both sector-specific issues and external factors in trade.
The ministry stated that the pharmaceutical industry faces increasing competition on the market for weight loss products. This has slowed down growth in the sector.
This downward revision comes after a period in which Denmark outpaced most of Europe, thanks to Novo Nordisk’s blockbuster drugs Wegovy, and Ozempic.
The growth of the Danish economy is also likely to be further dampened by tariffs on Danish imports into America, which is its biggest export market.
The exports of goods to the US dropped significantly during the first half 2025. This reversed a boom in 2024.
Exports are expected to grow by just 0.9% between 2025 and the ministry’s original forecast in May of 4.3%.
It expects the growth rate to rise to 2,1% by 2026. This is due to a stronger consumer and government sector.
Source: Bloomberg
The rise of Novo and its current struggle
In 2022, Novo surpassed LVMH as Europe’s largest company. This was due to a surge in the demand for diet drugs.
The market cap of Novo reached 570 billion dollars last year. This is more than the entire Danish economy.
The company has recently hit a barrier to its growth. It warned last month that it would not meet its earlier revenue forecasts for this year, and blamed the intensifying US competition.
In the US, Novo faces stiff competition from Eli Lilly and its GLP-1 drugs, such as Mounjaro, Zepbound and Zepbound. Cheaper copies of Novo drugs also threaten to erode their share.
The company now anticipates that sales will rise by 8 to 14% between 2025 and operating profits will grow 10 to 16 percent. This compares to a forecasted sales increase of 16-24%.
The share price of its company has fallen sharply, more than 10% by 2024 and 40% this year alone. This reflects investor concern about the intensification of competition with US competitor Eli Lilly as well as the sustainability and longevity in the market for obesity drugs.
The market capitalization of the company is close to 250 billion dollars.
Sales are still strong at 67% on an annual basis, but there is some concern about the future.
Source : Bloomberg
The dominance of Novo Nordisk drives growth, but it also brings risk
Denmark’s economy has been transformed by the rise of Novo Nordisk.
The company has been hiring at a rapid pace since 2020, and its sales will account for almost half the GDP growth in 2023.
This success, however, has also created some vulnerabilities.
Pharmaceuticals contribute 6.7% to the GDP of Denmark, and Novo Nordisk is now the largest exporter of Danish goods.
Las Olsen is the chief economist of Danske Bank A/S. Denmark’s biggest lender.
As a result of the company’s rapid growth, small businesses, construction companies, and hospitals are struggling to find skilled employees.
St Andrews Economist reports that in Kalundborg where Novo has its largest manufacturing hub, many small businesses have had to close after being forced out of business by the higher salaries offered by Novo.
The Nokia Saga in Finland teaches us valuable lessons
Novo Nordisk’s outsized influence on the Danish economy has raised concerns over a possible over-reliance. Finland, with Nokia as an example, is also concerned about this.
Nokia was the dominant player in the mobile market worldwide with its iconic 3310 device.
Its failure to adopt to the smartphone revolution – slow adoption of touchscreens and outdated software, as well as internal complacency – led to its steep decline.
Nokia’s share of Finland’s exports and GDP, Source: Theus
In 2014, Nokia had sold its mobile division, which served as a warning about the risks of economic disruption and concentration.
Denmark could face similar dangers if Novo Nordisk falls behind in the race for obesity drugs.
Mette Frederiksen, the Danish Prime Minister, acknowledged last year in an interview that regulatory agencies must monitor risks related to Novo’s dominance but disregarded Nokia’s parallels, stressing Denmark’s economic strength extends well beyond pharmaceuticals.
Sales are still strong at 67% on an annual basis, and have been for the last quarter. However, long-term concerns remain.
Market share is being captured by rivals like Eli Lilly, and the US pressure to lower drug prices has a negative impact on profitability.
A resilient economy, but questions remain
Denmark still retains solid fundamentals.
The public finances are strong. There is an abundance of savings in the country. Its economy has been diversified into sectors such as shipping (Maersk), beer (Carlsberg), Lego, toys, and renewable energy sources (Vestas).
The economy is more vulnerable than ever before because it relies on a single pharmaceutical company to provide so much of its employment, exports and growth in GDP.
Olsen, however, has pointed out that Novo is continuing to grow, as opposed to Nokia which experienced a steep decline.
The Danish economy, he said, is better prepared to handle the effects of a similar setback.
It remains to be determined whether Denmark will manage the transition successfully without falling victim to the same trap as Nokia.
The country is currently faced with a delicate balance: protecting the benefits of Novo Nordisk while making sure the economy as a whole does not become overly dependent upon one corporation.
The post Denmark reduces growth forecast after Novo slowdown sparks debate on reliance may be updated as new developments unfold.
