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GCC: Healthcare spending to hit $104bn by 2022

Source: Middle East Insurance Review | May 2018

A changing demographic and epidemiologic structure is stimulating demand for healthcare services in the GCC. At the same time, the role of the private sector in healthcare is increasing, encouraged by incentives, mandatory health insurance and other reforms, said investment bank Alpen Capital in a report which provides a perspective on the GCC healthcare industry.
 
   The report said healthcare spending in the region is projected to reach $104.6bn in 2022 from an estimated $76.1bn in 2017, implying a CAGR of 6.6%. Expanding population, high prevalence of non-communicable diseases, rising cost of treatment and increasing penetration of health insurance are factors auguring growth.
 
   Between 2017 and 2022, spending on outpatient services is predicted to grow at an annualised average rate of 7.4% to $32.0bn, faster than an anticipated CAGR of 6.9% on inpatient services to $45.4bn. The inpatient market will remain the largest segment with a contribution of 43.4% in 2022.
 
   The annual average growth rates of healthcare expenditure in the GCC countries are projected to range between 2.6% and 9.6% during the forecast period. The UAE and Oman are likely to witness growth rates of above 9%, in anticipation of a fast-growing population, implementation of mandatory health insurance and above regional average medical inflation rates. Saudi Arabia and the UAE will continue to dominate the sector with a combined share of over 80% in 2022.
 
Growth drivers
The GCC population size is anticipated to increase by 6.6m individuals to 61.6m by 2022, of which nearly 17% will be people aged 50 years and above.
 
   An increase in the incidence of non-communicable diseases has brought about changes in the epidemiological profile of GCC countries. Considering the high cost and length of treating such lifestyle ailments, the healthcare expenditure in the region is expected to rise.
 
   Governments across the region have either made health insurance mandatory or are in the process of doing so. The gradual rollout of compulsory health covers across the region will increase the utilisation of medical services at private healthcare facilities.
 
   Regional governments have framed long-term strategies aimed at capacity expansion, enhancing the effectiveness of the delivery system, encouraging public-private-partnership (PPP) models, and developing medical education and digitisation. Such strategies will upgrade the capacity and quality of care.
 
   The GCC has over 700 healthcare projects worth $60.9bn in various stages of development. This massive project pipeline is likely to augment the scale of healthcare services over the coming years. 
 
   Medical tourism is an integral part of economic diversification plans of the GCC countries and subsequently, it has been receiving stimulus from the region’s governments. Dubai and Abu Dhabi are at the forefront in the GCC in attracting medical tourists.
 
Key challenges
Being largely hydrocarbon-dependent, the fall in oil prices has widened fiscal deficits of the GCC countries, compelling governments to curtail expenses. With the government shouldering a large part of the healthcare expenditure, a low-price oil environment has been constraining the expansion of healthcare sector.
 
   Another major challenge faced by the healthcare providers is the limited availability of skilled healthcare professionals. The shortage of medical workforce locally, localisation of jobs, high attrition and rising staff cost are hindering growth.
 
   The cost of healthcare has been increasing due to the growing incidence of non-communicable diseases, technological advancements and limited availability of specialised care. Gross medical inflation rates ranged between 5.0% and 12.0% in the GCC countries in 2017, with the UAE witnessing the highest rate.
 
   The GCC healthcare system has limited capacity and technology to treat ailments such as cancers, neurological disorders and cardiovascular diseases. This has led to locals travelling overseas for medical treatment.
 
   The report said an ageing population, the high incidence of NCDs, a focus on preventive care and quality enhancing reforms are reshaping and strengthening the GCC healthcare industry. The sector is offering immense potential in areas of specialised care, technology, primary healthcare services and medical tourism. The opportunities, coupled with a friendly business climate, are encouraging investor interest in the healthcare industry. M 
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