Risks To Long-Term Macroeconomic Outlook Feeds Into Pharmaceutical Forecast Downgrades
BMI View : Russia's economy is overwhelmingly reliant on oil and gas exports to deliver growth. Our Oil & Gas team expect oil prices to decline over the long term as supply overtakes demand. This has led to our Country Risk team expecting depreciatory pressure to mount on the Russian rouble over the medium term. As a result, our pharmaceutical sales forecasts have seen significant revisions in US dollar terms. As the provision of healthcare is shifted onto the state, we expect further tightening of procurement rules over the medium term.
According to our Country Risk team, Russia's growth trajectory is expected to slow markedly over the 10-year forecast horizon, with average real GDP growth of just 3.7% between 2016 and 2022, well below the growth observed during the past five years. Russia's oil and gas exports, which have underpinned the remarkable growth over the last decade, are set to observe a sustained decline over the long term as stagnating output and declining global oil prices weigh on headline real GDP expansion.
Oil exports have posted negative growth rates in the past five quarters from double-digit growth rates in the pre-financial crisis era, reflecting tapering demand from Russia's major export destination: Europe. Energy prices are expected to decline for the foreseeable future, as shale oil and shale gas assets are brought online and into production within the region. Hydrocarbon exports account for over 66% of the Russian export basket; as prices of hydrocarbons decline, there will be contractionary pressure exerted on Russia's current account balance over the long term.
|Shifting Macroeconomic Fundamentals Impact Long Term Outlook|
|Pharmaceutical Sales, US$bn|