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We continue to hold our subdued outlook for the Lithuanian pharmaceuticals market during the next few years, on account of the changing economic and demographic situation. We expect limited low single digit growth in 2012, with the market expected to increase by a local currency margin of 2.5 %year-on-year (y-o-y) to reach LTL1.68bn (US$618mn) in 2012 at consumer prices. However, in US dollar terms, the market's value will shrink by 6.3%, indicating the challenges facing companies operating in the market.
Headline Expenditure Projections
- Pharmaceuticals:LTL1.64bn (US$659mn) in 2011 to LTL1.68bn (US$618mn) in 2012; +2.5 %in local currency terms and -6.3% in US dollar terms. Forecast slightly up from Q412 on account of new macroeconomic data.
- Healthcare:LTL6.99bn (US$2.81bn) in 2011 to LTL7.29bn (US$2.68bn) in 2012; +4.3% in local currency terms and -4.7% in US dollar terms. Forecast slightly up from Q412 on account of new macroeconomic data.
- Medical devices:LTL679mn (US$273mn) in 2011 to LTL749mn (US$276mn) in 2012; +10.3% in local currency terms and +0.8% in US dollar terms. Forecast slightly up from Q412 on account of new macroeconomic data.
In our Q113 Pharmaceuticals Risk/Reward Rating (RRR) matrix, Lithuania is 15th, out of the 20 markets surveyed in Emerging Europe, below its Baltic peers. Although Lithuania boasts a largely risk-free operating environment, its muted rewards prospects will continue to impact its standing in the regional matrix. Globally, Lithuania ranks 60th out of 95 markets surveyed.
Key Trends and Developments
In October 2012, Seimas of the Homeland Union-Lithuanian Christian Democrats (TS-LKD) faction George Razma appealed the government to reconsider additional funding of LTL60.0mn (US$22.7mn) for healthcare institutions in the country. Lithuanian patients have to pay extra for medical services that should be available for free, Razma said. The additional funds are expected to partially solve the issue of lack of funding for treatment services. Razma asked the government to evaluate the proposal after considering the difficult situation of Lithuania's hospital system.
BMI Economic View:
We have revised up our growth outlook for 2013 economic growth on account of improved financing conditions and signs of a tightening labour market. However, Lithuania's construction sector remains a long way off from a meaningful recovery, and coupled with a weak external climate, we maintain a tepid outlook for the economy over the coming years.
BMI Political View:
Controversy surrounding an ongoing criminal investigation into key members of a majority newly-elected coalition party means that the incoming administration of Prime Ministerdesignate Algirdas Butkevicius will be under enormous pressure to acquire political credibility by honouring its anti-austerity mandate. Although we have long accounted for a looser fiscal policy in our view that Lithuania would continue to progress towards euro adoption, the risk of major coalition instability and a rift with the president's office threatens to force the government into a far more aggressive policy direction than under our current baseline scenario.