Morocco Pharmaceuticals and Healthcare Report Q1 2013

BMI View: Morocco's subsidised health insurance scheme, Régime d'Assistance Médicale(RAMED), launched in March 2012, is experiencing early-stage difficulties with its target toincrease healthcare accessibility to those on low incomes. This is to be expected, given the evidence ofbribery and corruption, and the shortage of doctors in the sector. BMI believes the commitment toimprove governance and implement controls in the sector will be fulfilled in the medium-to-long term. Assuch, we maintain that government healthcare spending will outpace private healthcare spending overthe forecast 2011-2016 period.

Headline Expenditure Projections

Pharmaceuticals: MAD10.10bn (US$1.25bn) in 2011 to MAD11.24bn (US$1.30bn) in 2012;+11.3% in local currency terms and +4.5% in US dollar terms. Forecast broadly unchangedfrom Q412.

Healthcare: MAD41.99bn (US$5.19bn) in 2011 to MAD47.09bn (US$5.46bn) in 2012; +12.2%in local currency terms and +5.4% in US dollar terms. Forecast slightly higher from Q412, onaccount of slightly lower historical figures.

Medical devices: MAD2.19bn (US$270mn) in 2011 to MAD2.47bn (US$287mn) in 2012;+13.1% in local currency terms and +6.2% in US dollar terms. Forecast broadly unchangedfrom Q412.

Risk/Reward Rating: In Q113, Morocco remains 12th out of the 30 markets included in the MEAregion. Its composite score remains unchanged, at 46.8 out of the maximum 100. The country's rewardsratings are less promising than its risks profile, which weighs down its overall score. The market ismedium-sized by regional standards and small on a global scale, but its high growth potential offsetsrelatively low per capita drug consumption, especially in rural areas. In the risks category, Moroccoscores above the regional average, indicating a relatively low level of country and pharmaceuticalindustry-specific risk in a somewhat volatile region.

Key Trends And Developments

Emergency and psychiatric care will hold a top priority in the country's health reform, saidMorocco's Health Minister Houcine El Ouardi to local press in November 2012. The ministerwill address the acute shortage of psychiatrists and specialist nurses in Morocco. El Ouardiassured that the ministry is working towards the development of a community-based policy onhospital and pre-hospital emergency care. The health ministry will establish four universitydepartments specialising in child and adolescent psychiatry, where ten psychiatrists can betrained every year.

In October 2012, United Arab Emirates (UAE)-based developer Tasweek Real EstateDevelopment and Marketing was reported to be planning to build a healthcare city inMarrakesh, Morocco, according to CEO Masood al-Awar. Tasweek has already gainedapprovals for Marrakesh Healthcare City and all the components required for its constructionhave arrived, Awar told Arabian Business. The US$40mn healthcare city will cover an area ofnearly 21,000m2 and will feature a 40-room boutique hotel, a 160-bed private hospital and 56residential apartments. Tasweek will start construction work in 3-6 months, with the workexpected to be complete by 2014.

BMI Economic View: Despite not possessing hydrocarbon wealth, the economy will remain a relativeoutperformer in North Africa over the medium term. Though we expect 2013 to be a challenging year asexposure to the European recession takes its toll, investor interest in the country as an export-orientedmanufacturing hub for the European market, coupled with a burgeoning tourism industry, should bodewell for Morocco's underlying growth momentum through to 2015. Our forecasts for both economicactivity and fiscal policy assume that Morocco will benefit from significant inflows of foreign aid fromthe Gulf Co-operation Council (GCC) and other organisations in 2012 and 2013. Should this assistancefail to materialise, it would pose serious downside risks to the country's outlook.

BMI Political View: Given the deteriorating state of the Moroccan economy and stagnating politicalliberalisation, popular support for the Benkirane administration is likely to evaporate further in thecoming quarters. With the monarchy continuing to assert its control over the government, a return of theprotest movement that started in 2011 cannot be ruled out. A ministerial reshuffling is also looking likely,potentially introducing instability at the top of the policy ladder.