The Global Outlook for Healthcare

Editor's note: This is the first of a three-part series that forecaststhree critical end-markets for injection moulders worldwide. This month'sinstallment focuses on the healthcare industry; computers and automotivewill be discussed in the next two issues. This forecast and the informationin our chart is compiled exclusivelyfor IMI.

The next 12 months will be difficult ones for injection moulders aroundthe globe, particularly those in Asia and Latin America. At the same time,injection moulders in North America, a good portion of Western Europe,and the Middle East will enjoy solid growth rates.

Beyond the immediate future, the general outlook for injection mouldersis exceptionally good with probable global average growth rates per yearof more than 5 percent. Note that some areas, such as Western Europe andthe USA, will return slower growth while countries such as the Asian tigerswill ultimately resume rapid expansion, bringing up the global average.

How should moulders serving the healthcare industry specifically positionthemselves to benefit from this boom? What moves can be made now? The followingis a relatively simple road map to future growth. A wealth of data allowsyou to pick and choose those targets that are the most attractive for yourmoulding business.

A Word on Methodology

Healthcare, automotive, and computers can serve as a barometer forthe rest of the injection moulding economy. These markets come with relativelydetailed and rather reliable data and account for about 22 percent of thetotal injection moulding market in lesser-developed countries. In suchfully developed nations as France, Italy, and the United States, thesethree markets account for roughly 36 percent of the injection mouldingoutput.

This outlook is not a detailed look at each country and each of the manymarkets that use injection moulded components. The data for such an exerciseare just not there. It will be many years before international economicdata will be available that match the scope and detail common in the UnitedStates and in Western Europe.

We consulted sources as diverse as the International Monetary Fund, theUnited Nations, the U.S. Department of Commerce, the economists at theEuropean Union (EU) in Brussels, and economic experts in Asia.

A Tale of Two Economies

First, here are some basics. While healthcare spending is moderatingsomewhat in the United States and Western Europe, some emerging economiessuch as those of India, China, Thailand, Korea, and Latin America are morethan compensating for any slowdown in spending.

To properly analyze the pivotal healthcare sector, we used the followingbasic assumptions supplied to us by the World Health Organization. In developedcountries--that is, the European Union or the United States--about 12 percentof all healthcare spending goes toward medical devices--a hot market forinjection moulders--and another 7 percent goes toward production of suchsingle-use items as syringes, drinking cups, and the like.

However, emerging economies--with typically younger populations--currentlyspend only about 8 percent of each healthcare dollar on medical devices,and just 4.5 percent on single-use items. But due to improving wealth anddemographics, this is likely to change, and healthcare spending in thedeveloping economies will increase far more rapidly than in the developedworld.

Global healthcare expenditures will rise some 8.1 percent/year in the 1998-to-2003period, according to the best available forecast (see data in ourchart). However, many countries have far slower growth bringing theaverage down to 4.8 percent/year. These numbers may be conservative.

A forecast developed by the Washington, D.C.-based National Coalitionon Healthcare projects that healthcare costs will rise more dramaticallyin the next five years, outracing inflation by 2 to 1. Starting in 1997,U.S. healthcare spending is likely to grow 6.4 percent annually.

Countries with high anticipated growth include China, with 11.2 percent;Japan, with 9.2 percent; and the United States, with 7.7 percent.

The biggest opportunity for moulders comes in Asia where a booming demandfor healthcare services will create new business opportunities in the longterm. Industry analysts estimate that health spending is about 3 percentof GDP on average in ASEAN countries, which groups Brunei, Burma, Indonesia,Laos, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. Thisfigure is set to grow dramatically as pressure mounts on governments toimprove healthcare provisions and they turn to the private sector ratherthan embark on massive public spending rounds. Detailed data for more than80 countries follows in our chart.