We have decided not to alter our near-term outlook for the Belarusian pharmaceutical market this quarter. We continue to regard factors such as local currency devaluation, state dominance in pharmaceutical manufacturing and regulatory bias against foreign producers as being instrumental in shaping the development of the country's pharmaceutical market. While demographic and epidemiological factors are conducive to larger volume consumption of treatments targetting non-communicable diseases in particular, economic uncertainty and substantial out-of-pocket expenses will continue to hamper concerted gains in this direction.
Headline Expenditure Projections:
- Pharmaceuticals: BYR6,550bn in 2012 (US$783mn) to BYR8,394bn (US$961mn) in 2013; +28.2% in local currency terms and +22.7% in US dollar terms. Forecast broadly in line with the previous quarter's figure.
- Healthcare: BYR23,278bn (US$2.78bn) in 2012 to BYR27,815bn (US$3.18bn) in 2013; +19.5% in local currency terms and +14.4% in US dollar terms. Forecast broadly in line with the previous quarter's figure.
Risk/Reward Rating: In our latest Pharmaceutical Risk/Reward Rating (RRR) matrix, Belarus remains 15th out of the 20 countries surveyed in the Central and Easter Europe (CEE) region. However, we caution that the country presents less than favourable pharmaceutical opportunities in terms of risk. Among some of the pressing issues are corruption, political isolation, the overbearing state influence in the sector and the lack of a comprehensive pharmaceutical reimbursement policy.
Key Trends And Developments:
- In August 2013, Chinese drugmaker Harbin Pharmaceutical Group was reported to be considering forming a joint venture (JV) to manufacture drugs in Belarus, according to Nie Yunling, the vice chairman of the People's Government of the city of Harbin. The company has reportedly been a regular supplier of antibiotics and raw materials to Belarus for many years.
- In June 2013, Vyacheslav Reut, the first deputy chairman of the Belarusian Chamber of Commerce and Industry, signed an accord to set up the Belarusian-Swiss Business Council, according to BelTA. At the time, Reut added that extending cooperation with Switzerland in the chemical and pharmaceutical industries is particularly significant to Belarus.
- In the same month, governments of Belarus and Laos signed a memorandum of understanding (MoU) for setting up a joint intergovernmental commission for bilateral cooperation. The two countries are also keen to create registration and supplies business for pharmaceutical exports from Belarus to Laos, among other projects.
BMI Economic View: The Belarusian ruble is set to remain on its depreciatory path over the short term, which has seen it move from BYR8,570/US$ at the start of the year to BYR9,060/US$ at the time of writing. While it remains difficult to pinpoint whether a substantial one-off devaluation will be implemented or the authorities will continue to allow a more gradual depreciation, we expect the ruble to lose a substantial amount of its value in an attempt by the government to tackle the country's substantial current account deficit (17.1% of GDP in Q1 2013).
BMI Political View: The recent arrest of Russian potash company Uralkali's Chief Executive Vladislav Baumgertner by the Belarus Investigative Committee, on the grounds of 'abusive exercise of power and abuse of office', is likely to lead to a protracted and painful reduction in trade with Russia, the country's key economic partner. Baumgertner was arrested at Minsk airport after meeting with Belarusian Prime Minister Mikhail Myasnikovich, where they discussed the break-up of the joint venture (JV) between Uralkali and Belarusian state-owned potash producer, Belaruskali. Russia has already reduced crucial oil supplies and we do not rule out further punitive action, which could also have a bearing on pharmaceutical imports from Belarus' neighbour.