2012-09-10 06:04:16 - Belarus Pharmaceuticals and Healthcare Report Q1 2012 - a new market research report on companiesandmarkets.com

The Belarusian pharmaceutical market has strong long-term potential given its position bordering the EU and Russia, its demographic profile and still low per capita spending on pharmaceuticals. However, over the next 12-18 months the market faces a rocky transition as the country surrenders its tiered exchange rates, belatedly devaluating the rouble. Despite extravagant claims by the government, the reality is that people will struggle to afford many essential medicines. In US dollar terms, we project the market will contract in 2011 and 2012.

Headline Expenditure Projections

- Pharmaceuticals: BRB2,111bn (US$720mn) in 2010 to BRB3,546bn (US$616mn) in 2011; +67.9% in local currency terms and –14.4% in US dollar terms. US dollar forecast substantially downgraded due to macroeconomic developments.

- Healthcare: BRB8,763bn (US$2.99bn) to BRB11,770bn

 

 

(US$2.05bn) in 2011; +34.3% in local currency terms and -31.5% in US dollar terms. US dollar forecast substantially downgraded due to macroeconomic developments.

- Medical devices: BRB933bn (US$318mn) in 2011 to BRB1,582bn (US$275mn) in 2011; +69.5% in local currency terms and -13.6% in US dollar terms. US dollar forecast substantially downgraded due to macroeconomic developments.

Business Environment Rating

Belarus is 18th out 20 Central and Eastern European (CEE) markets again this quarter, though its composite score continues to decline. The country experiencing a severe economic crisis that could destabilise its political arrangements, as the wheels come off the once carefully managed economy. Some form of deeper integration with Russia via a bailout and taking over strategic industries appears increasingly likely. For now, however, instability prevails.

Key Trends And Developments

- In late August 2011, the government bowed to inevitability and allowed a free float of the rouble, ending years of enforcing a peg with the US dollar. The decision saw the currency decline even further in September, following devaluation in May, though it stabilised late in the year. The currency crisis has presented the pharmaceutical industry, as well as consumers, with a major crisis, with the value of the rouble falling by a third. Measures to limit rises in drug prices have failed so far. Unsurprisingly, prices for imported and domestically produced medicines have risen considerably in the wake of currency devaluations in May and September 2011, driven partly by the fact that locally manufactured medicines account for just 20-30% of pharmaceutical sales by value. Furthermore, imports of raw materials, including active pharmaceutical ingredients (APIs) for products that are domestically produced, are high. Local estimates suggest 70% of domestic pharmaceuticals are produced with imported APIs.

- Economic realities have yet to filter through to official statements, which at times appear deeply unrealistic. In October 2011, President Alexander Lukashenko reiterated a target that 50-55% of the volume of drugs sold should be domestically produced by 2015. According to health ministry officials, this would require a doubling of domestic production. The president said that since independence from the Soviet Union, Belarus has not privatised any pharmaceutical companies, believing they should remain in state hands to ensure supply. Although symptomatic of the current regime, BMI believes this is key to the underdevelopment of the domestic industry and the lack investor interest.

BMI Economic View

In light of the massive depreciation of the rouble in 2011, Belarus current account deficit is expected to correct sharply over the medium term. Moscows commitment to support Minsk via lower gas import payments and soft loans has helped alleviate short-term pressure on Belarus external financing needs. However, this heightens Belarus economic dependence on Russia and limits the scope for economic reform.

BMI Political View

As the Belarusian economy remains mired in a severe financial crisis, the government faces strong political headwinds over the medium term. Not only does the prospect of political dissent remain high in light of the deteriorating macroeconomic outlook, the risk of becoming overly dependent on financial aid from Moscow has also risen. Similarly, while efforts were made to improve the countrys business environment in 2011, corruption remains a major impediment for the investment climate.The price of this market report covers 4 quarterly reports on this sector. This quarterly report will be downloadable instantly as a PDF document, with the 3 remaining reports delivered at regular intervals throughout the year.

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