Vietnam’s healthcare industry not affected by inflation


Despite inflation and economic recession, the healthcare industry in Vietnam is forecasted to continue to grow steadily in the coming period when the demand for medical examination and treatment, drug prices, and hospital fees all increase sharply while input costs increase at a much slower rate.


In recent years, the healthcare market in Vietnam has been growing rapidly. The total spending on health-related products and services increased from USD 16.1 billion in 2017 to USD 20 billion in 2020. During and after the Covid-19 pandemic outbreak, this industry has even more opportunities to develop because there are more medical needs and people are increasing aware of their health.


When the Covid-19 epidemic is under control, the healthcare industry continues to benefit as it is among least affected industries by inflation. Even in the period of economic stimulus, factors such as the public investment stimulus package, low-interest concessional loans or rising borrowing costs have almost no impact on the healthcare industry.


A recent report of SSI Securities Company stated that, after a favorable first half of 2022, high growth is expected to continue in the last six months of the year. SSI Research estimates that the health care industry will grow by 13% over the same period. This growth is supported by three big factors.


First is the comparative low profit last year due to the impact of social distancing measures on visits to hospitals as well as drug stores.


Secondly, there is a shortage of drug supply due to the tight drug registration process.  Companies are taking advantage of this situation to adjust drug prices to offset increased


Finally, there has been a shift in labor force from public to private hospitals due to low wages, high health and regulatory risks, and poor public facilities.


The positive profit outlook of the healthcare industry is also forecast to extend into 2023, despite the economic downturn scenario.


One of the positive supporting factors for this industry, according to SSI Research, is the rapid expansion of drug retail chains in Vietnam such as Long Chau, An Khang and Pharmacity to stimulate drug demand.


In addition, hospital fees are likely to increase significantly across the country, as the Government can increase hospital fees and charges to facilitate public hospitals to maintain operations and retain doctors.


In addition, the competitive environment becomes more favorable for private hospitals and pharmaceutical companies, when regulations are tightened, and pricing is more market oriented with preference given to companies that provide high quality medicines and healthcare services. With the above expected growth, healthcare demand could surpass pre-Covid-19 levels by 2023.


It is believed that the profit margin of companies in the healthcare sector will peak in 2023 as drug and hospital costs increase sharply while input costs increase at a much slower rate.


After peaking, the industry's profit margin is forecasted to remain quite stable in the following period as there will be no significant fluctuations. The healthcare industry's valuation will also be positive, supported by strong earnings growth and a sound shareholder structure in healthcare companies.



Source: VietnamCredit

Write a comment

Comments: 0