Headline Expenditure Projections
- Pharmaceuticals: SEK35.27bn (USD5.54bn) in 2013 to SEK34.63bn (USD5.10bn) in 2014; -1.8% in local currency terms and -8.1% in US dollar terms.
- Healthcare: SEK345.00bn (USD54.21bn) in 2013 to SEK353.86bn (USD52.08bn) in 2013; +2.6% in local currency terms and -3.9% in US dollar terms.
Risk/Reward Rating: Sweden remains viewed as a moderately attractive regional market. On the positive side, factors such as the country's high per capita incomes and strong regulatory foundations will continue to promote per capita spending on pharmaceuticals and healthcare in general. However, the downward pressure on pharmaceutical prices will continue to be acutely felt in this small market of fewer than 10mn people.
Key Trends And Developments
In April 2014, it was reported that private equity firms have cut down on new investments in public service provision in Sweden following scandals that led to calls for more state control, leading to questions as to who will meet the increasing cost of the ageing population. Private equity firms in Sweden own most of the companies that provide health and care to the elderly. Due to this, many social democrats leading in opinion polls intend to claw back money from such firms. The finance ministry is planning to impose tougher rules on firms operating in the sector. Private equity firms invested SEK59mn (USD9.01mn) in welfare firms in 2013, down from an average of SEK2.3bn (USD351.37mn) per year in previous years, according to the Swedish Venture Capital Association.
In April 2014, Meda issued a statement from its Board of Directors, in which the company confirmed that it had been contacted by Mylan regarding an indicative proposal to combine the two businesses. However, the statement noted that Meda's Board had convened and had decided to reject the proposal. The statement added that all continued discussions between Meda and Mylan have been terminated without further actions.
BMI Economic View: We have revised up our Swedish real GDP growth forecast for 2014 to 3.2% from 2.4% due to a much stronger-than-expected Q413 pushing up the statistical base effect. Our core view for a strengthening Swedish economy amid improving domestic demand has not changed, and our 2015 growth forecast remains at 2.8%.
BMI Political View: With the outcome of the September 2014 election very likely to be a majority coalition government led by the Social Democrats, we expect a shift in government policy toward greater state interventionism. Such changes could include tax hikes and increasing government spending.
Sweden is among the most attractive destinations for foreign investment within Europe. As one of the most advanced economies in the world, the country benefits from an extremely developed infrastructure network, a highly educated and competitive workforce, low corruption and an effective legal system. EU membership has made the country highly integrated with the global economy, and the government has proactively encouraged foreign investment though privatisations and a low corporate tax rate. The cost of doing business is the main drawback to the country's business environment. A 25% VAT, high personal income tax, rigid labour market and high costs for goods and services weigh on the investment climate. While Sweden's pharmaceuticals market is small compared with its Western European neighbours, BMI believes the country's high public expenditure on health and the favourable business environment are major factors in making it an attractive place in which to set up operations.