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Iraq Pharmaceuticals and Healthcare Report Q4 2011
Business Monitor International, Oct 2011, Pages: 60
BMI View: Iraq’s commercial potential as a pharmaceutical market is viewed with increased interest by foreign manufacturers, although the present challenges are well-documented. Nevertheless, its large population, which is expected to reach 37mn in 2015, and the attractive epidemiological profile will provide a solid foundation for future market growth. Additionally, demand for medical treatment will continue to be created by the expansion of healthcare facilities, in line with the wide-ranging government programme for the investment of oil revenues.
Headline Expenditure Projections
- Pharmaceuticals: IQD814.03bn (US$696mn) in 2010 to IQD1,018bn (US$870mn) in 2011; +25.0% in both local currency and US dollar terms. Forecast up slightly from Q311 due to macroeconomic factors.
- Healthcare: IQD4,244bn (US$3.63bn) in 2010 to IQD5,214bn (US$4.46bn) in 2011; +22.8% in both local currency and US dollar terms. Absolute figures up from Q311 due to new historical data, but forecast virtually unchanged.
- Medical devices: IQD331.77bn (US$284mn) in 2010 to IQD407.70bn (US$348mn) in 2011; +22.9% in both local currency and US dollar terms. Forecast virtually unchanged from Q311.
Business Environment Rating: In our latest Pharmaceuticals & Healthcare Business Environment Ratings (BER), Iraq ranks in an unchanged 15th position, out of the 19 markets surveyed in the Middle East and Africa (MEA) region. Its composite score remains a modest 41.3, out of the maximum 100 points. Globally, the country now places 69th, out of 84 countries profiled in our pharmaceutical universe, as it is pushed down by the addition of New Zealand. Iraq’s low placement in the global and regional matrix is unlikely to change dramatically in the coming quarters, as its risks profile continue to be suboptimal, despite the promised increase in healthcare funding.
Key Trends & Developments
- In September 2011, UK drug major GlaxoSmithKline (GSK) announced that it is to invest in building a pharmaceutical manufacturing facility in Iraq
for the first time. The company has signed an agreement with local firm Modern Drug Industries that will see its medicines manufactured and packaged in Baghdad. GSK's early-mover strategy in Iraq will help protect the UK company's interests by generating public and political goodwill. Furthermore, offshoring manufacturing to low-cost bases will maximise profits. GSK believes that by investing in local manufacturing, it will be able to gain price and political advantages in regards to the awarding of state drug tenders.
BMI Economic View: The author has turned increasingly bullish on the Iraqi economy, primarily due to upward revisions to our oil and gas production forecasts and the increased number of investment contracts. Our core forecasts envisage real GDP growth of 9.8% and 12.6% year-on-year (y-o-y) in 2011 and 2012 respectively, which have been increased from 5.5% and 5.2% previously. However, although progress in Iraq's oil and gas sector will provide a massive boost to its fiscal accounts, the author cautions that sustained budget surpluses will be unlikely over the medium term. Our expectation of gradually declining oil prices, a continuation of massive public infrastructure spending, and aggressive budgetary forecasting will keep the budget in deficit through 2015, which may require some repositioning of social expenditure, including that for healthcare.
BMI Political View: Given our optimistic outlook on oil production and exports, along with relatively sanguine projections for oil prices, the author sees scope for massively expansionary fiscal policy to continue. The combination of relatively high prices and larger volumes will allow Baghdad to continue its policy of expanding current consumption as well as fixed investment. The author also foresees moderate growth in private consumption. As the Iraqi government keeps a lid on consumer prices through food rations and other subsidies, the author sees scope for the consumer to expand purchases on other goods and services. However, the author notes that Iraq's growth story will be dependent on the maintenance of social stability, and a deterioration of the country's security environment poses downside risks to our growth forecasts.
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