Ana Nichols, the Managing Editor of the Industry Briefing at the Economist Intelligence Unit, gave a talk on January 30th, 2014 on the forecasting the trends in the Healthcare industry in 2014. The full report on all six industries—automotive, retailing, energy, healthcare, financial services and telecoms, is to be found at
http://www.eiuresources.com/Industriesin2014
This report has been published for the past four years, and includes an annual survey of confidence and opinions among business executives.
1. INDUSTRY SURVEY
The survey done in November 2013 of 647 executives, a third of whom were at the C-suite level, asked about their expectations in 2014 in relation to the global economy as a whole, their particular industry, and then their company. Did they think that conditions would be better in 2014 than in 2013, worse in 2014 than in 2013, or about the same? Historically, the sentiment is always much more positive when it comes to specific companies than it is for the global economy as a whole. Obviously, more executives think that their particular company is going to outperform the market.
If you look at the balance of sentiment, which is defined as the percentage of those who believe that the economy will do better in 2014 than in 2013 minus the percentage of those who believe that the economy will do worse in 2013 (and ignoring the percentage who believe it will remain the same), you get the following figures for the various industries:
| Industry | Balance of Sentiment * |
| Telecoms | 45% |
| Financial Services | 42% |
| Overall | 38% |
| Consumer Goods | 35% |
| Automotive | 31% |
| Energy | 23% |
| Healthcare | 17% |
As you can see from the chart above, the healthcare industry had the lowest balance of sentiment of all six industries, although the figure listed above of 17% is higher than the negative figure that existed last year. This is partly due to the pressure that the market has been under. Overall, the respondents were more positive in the Middle East, and far less positive in Latin America and in Europe, with Europe scoring slightly higher than Latin America.
One of the other questions we asked, to which we got some very interesting responses, was “which country outside the BRICs (Brazil, Russia, India, China) offered the greatest growth prospects?” When we’ve asked this question in the past four years, people have always said “developing or emerging markets”. However, this year overall the respondents starting citing quite a few developed markets. Although what you would call developing markets came on top of survey, there were quite a few appearances of Japan, USA, Germany, and Canada. From the healthcare respondents, here were the responses:
Which country offers greatest growth prospects (outside the BRICs)?
| Country | Number of respondents |
| Mexico | 31 |
| Vietnam | 17 |
| Argentina | 17 |
| Indonesia | 16 |
| Singapore | 15 |
| South Africa | 15 |
| Japan | 14 |
| USA | 14 |
| Germany | 14 |
Mexico was offered by far as the best growth prospect, followed by a selection of quite a lot of Asian countries (Vietnam, Indonesia, Singapore), one in Latin American (Argentina), but some developed countries as well (Japan, USA, Germany). Overall, considering all six industries, Indonesia came out on top, so it was unusual to see Mexico on top of this particular list for healthcare. South Africa also came up higher on the all-industry list of greatest growth prospects.
Regarding the issue of the relatively low balance of sentiment of respondents with regards to healthcare, this is the case despite the fact that overall spending on health care is rising steadily. This is part of a growing industry, and yet respondents were not very positive about prospects this year.
The one caveat is that this is nominal spending; this means that rapid growth in some countries reflects rapid inflation or population growth, which are some of the factors that is driving spending, particularly healthcare inflation. There is inflation in healthcare partly because of new products being developed and the need to incorporate more advanced medicines. But population growth is also quite a large driver of healthcare costs, particularly in emerging markets. The other drivers we need to talk about are an aging population: we calculate that about 10% of the world’s population is going to be over the age of 65 over the next five years. In some countries, that percentage is extremely high, so for example, in Europe it’s around 20%, and in Japan it’s getting near 30%. This is obviously a big driver of health care costs, because of the sheer amount of care that the elderly need and when they have health problems, they tend to be complicated ones which need a lot of investigation and often a long hospital stay. This is not just restricted to developed markets; obviously, China has quite a very similar aging problem, although it is not quite to the level of Germany and Japan, which have the highest percentages of population over 65%.
One factor that is not massively driving health care spending growth is economic growth. We actually calculate that, having undergone a massive boost as a percentage of GDP in 2009, when the economy dropped, the percentage of GDP devoted to health care spending has been lagging behind. It’s expected to continue tapering off as a percentage of GDP.
Over the world, there is a huge range in how much countries spend on healthcare. Overall, healthcare spending now swallows about 10.6% of global GDP. However, the percentage of GDP ranges from 2.4% in Pakistan to 18% in the US. There are some regions of the world where, despite not being particularly wealthy, health care spending is really quite high. Latin America’s health care spending, for example, is about 8%, which is not too far from the 10-11% spent in Western Europe. The transition economies spend a relatively large amount of their GDP on health care, but Asia is a bit low, with the Middle East and Africa being the lowest of all.
In all countries, however, the basic pattern is that the demand for health care is insatiable, which means that the spending on health care will continue to rise.
The next part of the webinar which I will continue tomorrow deals with some of the basic issues in the healthcare field. Due to commitments today, I was not able to finish the webinar today, so please return to this site later for a complete summary.
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