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Viewing report
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Belarus Pharmaceuticals and Healthcare Report Q2 2011
Business Monitor International, April 2011, Pages: 63
BMI View: Belarus has a potentially attractive pharmaceutical market and ideal geographic placement to access both European Union markets and the largest CIS markets of Russia and Ukraine. In reality, however, the country’s high degree of state economic management and the pariah status of its senior leadership following a brutal election crackdown in late 2010 has deterred most direct foreign investment in the pharma sector. The Customs Union with Russia and Kazakhstan means in practice that foreign companies will prefer to invest in Russia and export to Belarus to lessen their risk exposure. Current state policy foresees a multifold increase in pharmaceutical exports over five years, a policy even the central bank chief has questioned.
Headline Expenditure Projections
Pharmaceuticals: BYR2,111bn (US$720mn) in 2010 to BYR2,407bn (US$752mn) in 2011; +14.0% in local currency terms and +4.4% in US dollar terms. Forecast down moderately from Q111 due to macroeconomic factors and analyst modification of 2009 figures.
Healthcare: BYR11,964bn (US$4.1bn) in 2010 to BYR14,002bn (US$4.4bn) in 2011; +17.0% in local currency terms and +7.2% in US dollar terms. Forecast up due macroeconomic factors from Q111.
Medical devices: BYR778.1bn (US$265mn) in 2010 to BYR891.4bn (US$278mn) in 2011; +14.6% in local currency terms and +4.9% in US dollar terms. Forecast down marginally from Q111 due to analyst macroeconomic factors.
Business Environment Rating: Belarus’s score was slashed from 48.2 in Q211 to 40.7 in Q111, a result of a 12- point decline in industry rewards in view of the country’s deteriorating overall business climate, increased government intervention in the economy and alternative for companies to import into the country from within the Customs Union. The country’s ranking in the Central and Eastern European coverage universe declined from 12th to 18th out of 20 in one quarter, largely the result of the country’s bloody post-election crackdown and consequent political and economic fallout. .
Key Trends & Developments
Prime Minister Mikhail Myasnikovich claimed the country would build sophisticated “turn-key” new pharmaceutical plants in cooperation with “global brands” over the next five years in a speech covering the government’s economic development plans in March. Strikingly, the country’s national bank head questioned calls for a four-fold increase in exports by state-owned Belbiopharm as unrealistic.
New foreign investment remained thin on the ground in the production sector, with the exception of vauge Iranian and Cuban commitments to the market. A rare exception to the trend was in the retail sector, where Bulgaria’s Sopharma reportedly agreed to acquire Belarusian retail chain Interfarm for an undisclosed sum. .
BMI Economic View: While we expect Belarus's economic recovery to remain well supported by industrial activity and exports over the medium term, we nonetheless see growth falling from the robust 7.6% outturn recorded in 2010 to 6.8% in 2011 and further to 6.4% in 2012. Growth moderation will play out as the country's high current account deficit puts pressure on the government to tighten credit growth this year, in turn crimping household consumption. This will be further compounded by rapidly rising inflation which will continue to erode consumer purchasing power and household savings in the near term..
BMI Political View: We expect a compromise over the current oil price dispute between Belarus and Russia to be reached soon, with Belarus likely to bear more of the pain. While Minsk has attempted to reduce its economic and political dependence on Moscow in recent years, Belarus still relies heavily on crude oil supplies from Russia. Furthermore, with political ties with the West souring in recent months on the back of Belarus disputed presidential election, we do not believe Minsk will risk significantly worsening ties with its eastern neighbour at this juncture.
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