The total expenditure on healthcare (per capita) in all GCC member states increased considerably in 2011, said a report issued by KFH-Research, a subsidiary of Kuwait Finance House "KFH" explaining that total healthcare spending In the GCC region remains robust. Over the 10-year period between 2001 and 2011, health expenditure per capita grew at an annualized rate of 7.9% for the GCC region, said the report.
However, the overall healthcare expenditure in the GCC as percentage of GDP remains low at 3.8%, below the world average of 10%. The United Kingdom spends 9.3% of GDP on healthcare, while the United State spends the most at 16.2%. By country, total healthcare expenditure as a percentage of GDP in Saudi Arabia and Bahrain is 3.7%, relatively better than other GCC member states. This is followed by the UAE (3.3%), Kuwait (2.7%), Oman (2.3%) and Qatar (1.9%).
According to market consensus, the healthcare expenditure in the GCC countries is set to reach almost USD 80 bln in 2015 with public expenditure contributing approximately 64% of the aggregate.
The increase in total health expenditure is parallel with the population growth, rapid urbanization and lifestyle disease in the GCC which led to increased demand for healthcare services in the region. The GCC healthcare market is projected to grow at an annual rate of 11% by 2015, with Saudi Arabia and the UAE being the fastest growing markets.
The Kingdom of Saudi Arabia and the UAE are the largest markets together accounting for 75% of health spending in 2015 and are expected to be the fastest growing markets in GCC over 2010-2015 growing at over 12%, said the report. The public sector remains the major source of healthcare funding in the GCC, ranging between 63% and 80% of total health expenditure. In the public sector, the various health ministries of the respective countries are the primary healthcare service providers, although private sector spending on healthcare is steadily growing.
Hospital beds can be a basic measure of healthcare infrastructure, as an increase in the number of beds to the population improves healthcare availability. The demand for hospital beds in the region is expected to be more than double by 2025, requiring almost 162,000 beds. At present, the number of beds in the GCC on average is below US and European averages, said the report.
The distinguishing factor of the GCC markets as against other emerging markets is the massive role played by the governments and its unsustainability over the long run. Given that medical inflation is steeper than food inflation, the need for lowering the government share in health expenditure cannot be overemphasized. Government's willingness to promote the healthcare sector is seen as a positive sign for a surge in private investment in the region.
The governments of the GCC countries have consistently endeavored to promote good health in the states. The proposed setting up integrated healthcare facilities in the form of healthcare cities and medical hubs, coupled with continuous improvement in technology and infrastructure, will significantly improve the availability and quality of healthcare services in the region.
Healthcare costs continue to increase in the region partly due to the high prevalence of chronic diseases. It is expected that the GCC healthcare expenditure is set to reach USD 133.2 bln in 2018, reflecting CAGR of 16.2% over 2010- 2013.
The MENA and GCC healthcare market is being driven by strong economic growth, rapid urbanization, demographic changes, growing occurrence of lifestyle diseases, active government investment, and initiatives to form a structured policy and regulatory environment favoring higher contribution from the private sector, said the report. In recent years, the countries in the MENA and GCC region have been regularly increasing their budgetary spending on healthcare. Aided by large budgetary surpluses, GCC governments, in particular, have allocated large sums to improve their healthcare infrastructures. However, given the rising cost of medication, governments might find shouldering the healthcare costs for citizens burdensome, as this strategy is not sustainable over the long term.
Efforts to reduce the healthcare burden on the government and increase the role of the private sector through PPPs are likely to create tremendous opportunities for private equity players. However, in order for the medical industry to flourish in the MENA and GCC region, the healthcare infrastructure must be improved through a regulatory structure, the development of strategies to attract and retain professionals, as well as writing action plans for the development of facilities. Governments could play a more pivotal role in the healthcare sector, to enhance its reach and services in their respective countries. In addition there is a growing need for augmented medical facilities and improved medical insurance, for stronger healthcare market. Public private partnerships will surely aid in the development of the sector.