(Bloomberg) -- The massive growth of Novo Nordisk A/S is concealing weaknesses in Denmark’s economy, which would have stagnated over the past year and a half without its pharmaceutical industry.

Drug makers have boosted Danish gross domestic product growth by almost two percentage points from the end of 2021 through the first quarter of 2023, according to new calculations by Sydbank A/S. The industry now makes up about 5% of the economy, with Novo likely accounting for a large majority of this.

The strong run by the pharmaceutical sector has as such “camouflaged” a slowdown in other corners of the economy, Mathias Dollerup Sproegel, a senior economist at Sydbank, said. Denmark’s GDP grew almost 1% over the period, but excluding pharmaceuticals this figure would have been negative 1%.

The Scandinavian country is home to a string of drug makers, which also include H. Lundbeck A/S, Genmab A/S and Bavarian Nordic A/S, whose sales have boomed in recent years. But Novo’s meteoric rise, helped by its new weight loss drug Wegovy, has pushed its market value above Denmark’s GDP and made it Europe’s second-largest company by market value. 

The major contribution from a single company makes the economy more vulnerable, and there’s a risk Novo could become “Denmark’s Nokia,” Sproegel said by phone. The success of Nokia Oyj’s mobile phones in the 1990s and 2000s provided a significant boost to Finland’s GDP, but its downfall later dragged down the entire economy.

“It’s a luxury problem that we have a company that’s so innovative and sells so much,” Sproegel said. “But there’s a danger if Novo can’t deliver that growth; if it can’t continue to innovate or if the US implements strict price controls on its products, then this can put pressure on the Danish economy.”

Novo’s success is also indirectly impacting Danish monetary policy. The company’s US income is driving up the value of the krone, Sproegel said, which in turn has forced the Danish central bank to keep interest rates lower to protect the currency’s peg to the euro.

©2023 Bloomberg L.P.