Why weight-loss drugs like Ozempic are a game-changer for the global economy

• Capital Economics said weight-loss drugs could be game-changers for the world economy.
• Countries with high obesity rates like the US and Mexico have the most to gain, strategists said.

Over recent months, GLP-1 drugs like Ozempic and Wegovy have soared in popularity as silver bullets for weight loss. The trend has shown up everywhere from the stock market to pop culture, and Goldman Sachs has forecasted the medications could develop into a $100 billion market, and said that higher use of the drug in America could springboard the economy to further growth.

If the drugs gain more traction, it could lead to millions of pounds of collective weight loss — and ultimately fuel a global economic boom, according to Capital Economics.

Strategists said the growth outlook for these weight-loss medications offers the potential for game-changing GDP boosts around the world via improved labor market activity, healthier populations, and eventually more robust healthcare.

GLP-1 drugs, which target certain hormones to reduce appetite and food intake, so far have primarily improved the corporate pharmaceutical sector. For instance, shares of Zepbound distributor Eli Lilly have climbed 29% year-to-date. And Novo Nordisk, which makes Ozempic and Wegovy, has seen its stock climb more than 31% in the same stretch to boast a market cap larger than its native Denmark.

Billion-dollar swings in market cap have transpired even as the share of the global population actually taking the drugs remains tiny, which implies any economic impacts to-date have been relatively small.

In the US, estimates suggest only 1-2% of the population took the drugs in 2023.

"But given the rates of obesity, the potential market for the drugs is huge (in the US, for example, over 40% of adults are obese)," strategists wrote. "So, if take-up of the drugs continues to rise rapidly, there could be much wider economic effects."

Healthier labor markets and populations

The Organization for Economic Cooperation and Development (OECD) forecasts that, on average between 2020 and 2050, OECD countries will spend 8.4% of their health budget on treating the consequences of "high body mass."

Weight-loss drugs, in turn, could reduce total healthcare costs over the long term.

"For countries where healthcare is predominantly provided by the public sector, these savings could improve the fiscal situation," Capital Economics said. "These funds could be diverted to other, potentially more productive areas, or instead used to reduce government borrowing compared to otherwise."

Indeed, the organization World Obesity predicts that more people leading healthier lives could allow for less absenteeism, more labor participation, and higher productivity.

Capital Economics said these labor market forecasts could lead to the equivalent of 0.6% of global annual GDP by 2035, while the OECD's calculations suggest about 1.6% of GDP per annum until 2050.

In any case, the drugs could be particularly beneficial for countries with the highest rates of obesity like the US, Mexico, and Korea, the research firm said.

Capital Economics noted that share prices fell in 2023 for many fast-food companies as weight-loss drugs gained popularity, though some of those losses have since been pared. Still, the ripple effect could extend into various directions, like people buying new, smaller clothing and airplanes saving fuel with lighter passenger loads.

To be sure, plenty of uncertainty remains. Some adverse side effects are still unknown, costs could stay prohibitive, and supply may not be able to keep up with demand.

Weight-loss drugs and AI

GLP-1 drugs' emergence, meanwhile, has happened alongside the explosion of artificial intelligence technology and hype.

These forces could end up converging, and already healthcare has been the sector receiving the greatest amount of AI investment, according to Capital Economics.

"In the past, technology has tended to raise, rather than reduce, costs in the healthcare sector," the strategists said. "But AI might change that by, for example, making drug discovery more efficient and cheaper. If so, the economic gains heralded by weight-loss drugs might be just the beginning."