Nationalisation of the two largest, private health insurers have seen further setbacks as the treasury states that there is not enough funding to purchase majority stakes from shareholders and integrate them into the state insurer. We believe Prime Minister Robert Fico's government is losing the momentum to push through the changes needed to bring about the nationalisation, and therefore now believe it unlikely to go ahead. We forecast further generic uptake and greater co-payments by patients towards the cost of healthcare, in line with an established trend we see playing out in Eastern Europe. We believe growth in pharmaceutical spending will be weak as resources will be focused in long-term care and healthcare services as Slovakia's ageing population increases its demand on the healthcare system.
Headline Expenditure Projections
- Pharmaceuticals: EUR1.67bn (US$2.12bn) in 2012 to EUR1.67bn (US$2.22bn) in 2013; -0.2% in local currency terms and 4.5% in US dollar terms. Figures unchanged from Q413.
- Healthcare: EUR6.29bn (US$7.99bn) in 2012 to EUR6.47bn (US$8.61bn) in 2013; +2.8% in local currency terms and 7.7% in US dollar terms. Slight revision upward owing to better than expected GDP growth figures and rising private healthcare spending.
Risk/Reward Rating: Slovakia's Risk rating indicates the country has one of the best business environments in the Central and Eastern European region, but its ranking is moderated by its less-than-stellar rewards score. Consequently, Slovakia has a RRR score of 54 out of 100, making it the seventh-most attractive pharmaceutical market in Central and Eastern Europe.
Key Trends And Developments
- Budgetary conflicts and a lack of political will indicates that the nationalisation of the two largest private health insurers is unlikely to be go through in the short term.
- The International Court of Arbitration ruled in favour of Dutch-owned private health insurer Union, after Robert Fico's government banned health insurers from turning a profit. Although not legally binding, the decision sets a precedent for rulings from the EU Commissioner, who may strike down on Slovakia's measures.
- The government has increased the level of private contributions towards the cost of reimbursed medicines, as it seeks to continue its plan to curtail pharmaceutical expenditure.
- Pharmaceutical spending will be moderated at the expense of providing care and essential services in the short term.
BMI Economic View: Real GDP growth in Slovakia measured 0.9% year on year (y-o-y) in Q213, beating expectations as private consumption recovered. High frequency indicators support the idea that the downturn in 2013 will not be as severe as initially thought, and we have increased our target for full-year growth to 0.8% (from a previous 0.6%), rising to 2% in 2014. Downside risks have diminished, though we caution that the rebound in consumer confidence remains fragile and regional headwinds could yet weigh on the short-term outlook.
BMI Political View: The ruling party Smer, which holds an absolute majority in the Slovak parliament, remains in a strong position in the run up to local elections in November 2013 and a presidential ballot in April 2014. With the opposition still splintered and the country's economic outlook beginning to improve, we expect Prime Minister Robert Fico's government to continue with reforms with few obstacles. This bodes well for political stability in the short term, though a single-party dominance does also undermine consensus politics and could, over time, lead to an unhealthy concentration of power.