BMI View: Strong growth opportunities continue in Malaysia's pharmaceutical and healthcare sector, particularly in its generic drug market. This view is supported by the country's commitment to pharmaceuticals, ongoing calls to reform the healthcare sector and the relative stability in its macroeconomics environment.
BMI has reassessed its pharmaceutical and healthcare market forecasts for Malaysia. We now expect the Malaysia pharmaceutical market to reach a value of MYR13.4bn (US$5.48bn) through to 2022. Between 2012 and 2022, it is projected to grow at a compound annual growth rate (CAGR) of 8.2% in local currency terms (10.8% in US dollar terms).
|Strong Growth Potential|
|Malaysia Pharmaceutical Spending Projection (MYRbn)|
For the healthcare sector, the World Health Organization (WHO) has most recently indicated that the country spent MYR33.7bn (US$10.5bn) in 2010. Through to 2022, Malaysian healthcare expenditure will reach a value of MYR77.4bn (US$31.7bn). Between 2012 and 2022, the market is projected to grow at a CAGR of 6.4% in local currency terms (8.9% in US dollar terms).
|Malaysia Healthcare Expenditure Forecast (MYRbn)|
The forecast strong growth potential in Malaysia's pharmaceutical sector is supported by the country's systematic implementation of its entry point projects under the healthcare national key economic areas (NKEA). Between 2011 and 2012, Dr Mohd Nazlee Kamal, CEO of Malaysia Biotechnology Corp (Biotech Corp), stated that the country attracted MYR12.72bn (US$4.2bn) in biotechnology investment. This exceeded the MYR9bn (US$2.9bn) target for Phase II under the National Biotechnology Policy. With this success, the country revised its 2015 biotechnology investment target from MYR9bn (US$2.9bn) to MYR26bn (US$8.5bn).
Accordingly, the increase in investment, coupled with the country's plans to reform its healthcare sector, will boost pharmaceutical and healthcare access, bringing opportunities for pharmaceutical companies and healthcare providers. Similarly to many developing countries in Asia, generic drug firms will see higher growth potential given the lower cost of generic drugs, compared with their patented equivalents. In Malaysia, BMI forecasts that patented drugs will grow at local CAGR of 5.1% through to 2022, while the generic drug sector will grow at the significantly higher pace of 14.2%. Consequently, the share of generic drugs as a percent of total sales will increase from 31.7% in 2012 to 54.3% in 2022.
Malaysia's economy and political environment will also remain fairly stable. According to BMI's Country Risk team, although the upcoming election could pose a risk to our outlook in terms of policy continuity, the team expects the ruling Barisan Nasional (BN) coalition, to win. We also forecast that the economy will grow at an average for 4.0% year-on-year through to 2022.
BMI Economic View: Our view that the Malaysian economy in the midst of rebalancing towards domestic demand driven growth, Suggests that private consumption and gross fixed capital formation will be the key drivers of Malaysia's real GDP growth in 2013, which we forecast to come in at 4.5% .
BMI Political View: The BN coalition is set to face an increasingly close race at the upcoming general election according to the latest polls. Although our view remains that the BN will win by a marginal vote, we warn of the increasingly risk of a swing vote in favour of the opposition. Our worst-case scenario would include any attempts by the government to rig the vote, which would risk igniting widespread public unrest and present significant uncertainties to the country's long term political outlook.