- 22 Jan 2024 14:41
#15302600
The buoyant pharmaceutical sector, which contributes a third of the Scandinavian country's growth, has brought in a rush of foreign currency, forcing the central bank to act.
The booming consumption of anti-diabetic drugs in the United States is causing Denmark's monetary policy to wobble. This surprising macroeconomic version of the "butterfly effect" is the genuine head-scratcher the National Bank of Denmark (DNB) has faced for many months. "The pharmaceutical industry, whose exports have doubled in the last ten years, has become one of the main drivers of our economy, to an almost dizzying extent," said Helge Pedersen, an economist at Nordea Bank. Capital Economics says the sector has contributed a third of Danish growth since 2020.
This can be explained by the robust financial results delivered by Danish drugmaker Novo Nordisk. Sales of its anti-obesity treatment Wegovy, launched in the US two years ago, soared by 344% in the first half of 2023, while sales of its injectable anti-diabetic Ozempic continued to increase. "We are serving more patients than ever before," said Lars Fruergaard Jorgensen, Novo Nordisk's chief executive, earlier this month. The group, whose sales came at €23.7 billion in 2022, sees revenue up by 30% this year. The group's market capitalization, which exceeds €300 billion, is almost as high as Denmark's gross domestic product, which, according to Eurostat, stood at €380 billion in 2022.
"These good results have caused the current account surplus to take off," said Andrew Kenningham, a Denmark specialist at Capital Economics. The measure of trade of goods, services and income recorded a surplus of 13% of GDP in 2022, up from 8.8% in 2019. Even Germany never performed any better. "Thanks to this, Danish growth has outperformed that of its European neighbors in recent months," Pedersen said. Growth was 0.5% and 0.6% in the last quarter of 2022 and the first quarter of 2023, compared with an average of -0.1% and 0.2% for the European Union.
Discouraging investment
By the same token, the sector's good health is boosting government revenues: In 2022, the kingdom of 5.9 million inhabitants enjoyed a budget surplus of 3.3% of GDP, compared with a deficit of 3.4% in the EU. However, "Novo Nordisk's success, and that of the pharmaceutical industry in general, has resulted in a colossal influx of foreign currency into the country, pushing up the value of the Danish crown," said Palle Sorensen, an economist at Nykredit bank. This complicates the task of the DNB, whose mission is to keep the crown pegged to the euro.
To prevent the value of its currency from rising excessively, the DNB made massive purchases on the foreign exchange market in recent months, totaling 68 billion crowns between September 2022 and January 2023. Above all, it is keeping its key interest rate below that of the European Central Bank (3.35% vs. 3.75%) to discourage investment in the country and limit demand for crowns. The success of the Danish pharmaceutical industry should not, however, mask the difficulties of the rest of the economy, said Jens Naervig Pedersen, an analyst at Danske Bank: "Other manufacturing sectors are doing less well, as in the rest of Europe."
Others fear Denmark will become too dependent on a single company. Like Finland, whose economy was dominated by Nokia in the early 2000s and which took years to recover from the collapse of the telecommunications group. Novo Nordisk already employs 23,000 people in Finland and 55,000 worldwide. "But the sector doesn't account for much more than 1% of total employment, and we can count on other major companies," said Pedersen of Danske Bank. Examples include Lego, Carlsberg, and shipowner Maersk, which also contributes to the country's current account surplus.
https://www.lemonde.fr/en/europe/articl ... 9_143.html
Supersized Americans supersize Denmark's pharmaceutical companys, which in turn supersize their currency.
The booming consumption of anti-diabetic drugs in the United States is causing Denmark's monetary policy to wobble. This surprising macroeconomic version of the "butterfly effect" is the genuine head-scratcher the National Bank of Denmark (DNB) has faced for many months. "The pharmaceutical industry, whose exports have doubled in the last ten years, has become one of the main drivers of our economy, to an almost dizzying extent," said Helge Pedersen, an economist at Nordea Bank. Capital Economics says the sector has contributed a third of Danish growth since 2020.
This can be explained by the robust financial results delivered by Danish drugmaker Novo Nordisk. Sales of its anti-obesity treatment Wegovy, launched in the US two years ago, soared by 344% in the first half of 2023, while sales of its injectable anti-diabetic Ozempic continued to increase. "We are serving more patients than ever before," said Lars Fruergaard Jorgensen, Novo Nordisk's chief executive, earlier this month. The group, whose sales came at €23.7 billion in 2022, sees revenue up by 30% this year. The group's market capitalization, which exceeds €300 billion, is almost as high as Denmark's gross domestic product, which, according to Eurostat, stood at €380 billion in 2022.
"These good results have caused the current account surplus to take off," said Andrew Kenningham, a Denmark specialist at Capital Economics. The measure of trade of goods, services and income recorded a surplus of 13% of GDP in 2022, up from 8.8% in 2019. Even Germany never performed any better. "Thanks to this, Danish growth has outperformed that of its European neighbors in recent months," Pedersen said. Growth was 0.5% and 0.6% in the last quarter of 2022 and the first quarter of 2023, compared with an average of -0.1% and 0.2% for the European Union.
Discouraging investment
By the same token, the sector's good health is boosting government revenues: In 2022, the kingdom of 5.9 million inhabitants enjoyed a budget surplus of 3.3% of GDP, compared with a deficit of 3.4% in the EU. However, "Novo Nordisk's success, and that of the pharmaceutical industry in general, has resulted in a colossal influx of foreign currency into the country, pushing up the value of the Danish crown," said Palle Sorensen, an economist at Nykredit bank. This complicates the task of the DNB, whose mission is to keep the crown pegged to the euro.
To prevent the value of its currency from rising excessively, the DNB made massive purchases on the foreign exchange market in recent months, totaling 68 billion crowns between September 2022 and January 2023. Above all, it is keeping its key interest rate below that of the European Central Bank (3.35% vs. 3.75%) to discourage investment in the country and limit demand for crowns. The success of the Danish pharmaceutical industry should not, however, mask the difficulties of the rest of the economy, said Jens Naervig Pedersen, an analyst at Danske Bank: "Other manufacturing sectors are doing less well, as in the rest of Europe."
Others fear Denmark will become too dependent on a single company. Like Finland, whose economy was dominated by Nokia in the early 2000s and which took years to recover from the collapse of the telecommunications group. Novo Nordisk already employs 23,000 people in Finland and 55,000 worldwide. "But the sector doesn't account for much more than 1% of total employment, and we can count on other major companies," said Pedersen of Danske Bank. Examples include Lego, Carlsberg, and shipowner Maersk, which also contributes to the country's current account surplus.
https://www.lemonde.fr/en/europe/articl ... 9_143.html
Supersized Americans supersize Denmark's pharmaceutical companys, which in turn supersize their currency.
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