Transcript Ireland`s economic future and the implications for healthcare

Ireland’s economic future and
its implications for healthcare
in Ireland
IPHA Annual Meeting
Jane Suiter
26th November 2008
To Be Discussed
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International Background & Outlook
Irish Economic Background & Outlook
The Way Forward
Trends in the Pharmaceutical Industry
Challenges Ahead
International Background
• Global trade decline in 2009 - 1st time since
1982
• US , UK, Euro Zone, Japan in recession
• Oil prices and strong official response offer
hope, but wealth destruction & credit issues
will take some time to resolve
• Very challenging external environment 2009
After the party…
…a new age of thrift
Stock market to levels of a decade ago
House values almost 20% from peak
Consumer spending down 3%+ steepest since
Carter credit controls
Unemployment from 4.4% to 6.5% rising
BUT inflation actually falling
“The golden age of spending for the American
consumer has ended and a new age of trhift
has begun,” Richard Berner of Morgan Stanley
Housing market a drag
Second-hand housing stock for sale at 56,000 units, up
30% year to date
20.0
56000
18.0
54000
16.0
Month's supply
52000
Stock for sale
Month's supply of existing unsold homes in the US
50000
48000
46000
14.0
12.0
10.0
8.0
6.0
44000
4.0
42000
US long-term average
2.0
40000
0.0
Oct- Nov- Dec- Jan- Jan- Feb- Mar- Apr- May- May- Jun07
07
07
08
08
08
08
08
08
08
08
Source: Daft.ie
Estimated Irish level = 18
Note: We do not have an accurate estimate of the stock of new homes for sale
Jul08
Aug- Sep08
08
Oct84
Source: Datastream
Dec86
Feb89
Apr91
Jun93
Aug95
Oct97
Dec99
Feb02
Apr04
Jun06
Aug08
Money markets dysfunctional
UK, eurozone & US 3 month interbank spreads over
base rates
400
350
300
250
bps
200
150
100
50
0
Nov-07
Dec-07
Jan-08
Feb-08 Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
-50
-100
Source: Bloomberg
euribor
libor
$ libor
Sep-08
Oct-08
And our trading partners
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UK – 1st recession for 18 years in 2009
Unemployment 5.6% to 8%
House prices to fall 25% to mid 2009
Euro zone in 1st recession in 10 years
since euro introduced. Exports badly hit.
• Germany baldy hit. France less so.
• Good decline in euro and rates
GDP Forecasts (IMF)
2008
2009
2010
US
1.6
0.05
2.04
UK
1.0
-1.3
2.2
Euro zone 1.3
0.2
1.3
Ireland
-0.6
2.5
-1.8
An Economy in Recession
Irish Economic Forecast
2007 (f)
2008 (f)
2009(f)
GDP
4.1%
-1.8%
-2.1%
GNP
6.0%
-1.7%
-1.7%
Consumption
6.3%
-0.3%
-0.8%
Investment
1.2%
-18.6%
-18.7%
Government
6.0%
1.0%
0.7%
Exports
6.8%
2.2%
2.1%
Imports
4.1%
-1.0%
-1.3%
CPI
4.9%
4.3%
1.8%
Unemployment
4.5%
6.2%
7.8%
Summary of Forecasts DKM
Changing make-up of GDP
GDP Constant Prices 1997-2001
GDP Constant Prices 2002-2007
Agriculture Forestry and
Fishing 2.45
Industry 25.36
Agric ulture Forestry and
Fishing
Industry
Construction 9.69
Distribution Transport
and Communication
17.25
Public Admin 4.55
Other Services (including
Rent) 40.70
Construc tion
Distribution Transport
and Communic ation
Public Admin
Other Servic es (inc luding
Rent)
The Irish Economic Outlook
• Economy in deep recession
• Construction collapse
• Unemployment rising sharply - public sector
up
• Consumer sentiment badly hit
• Export sector challenged by cost
competitiveness
• Self inflicted fiscal crisis
• Compounded by developments financial
markets
New Home Completions
House Prices (YoY)
Sweden’s bust lasted nearly
three years
25
230
220
20
210
200
15
190
10
180
170
5
160
0
Q4 1990
150
Q4 1991
Q4 1992
Q4 1993
Housing Starts
Q4 1994
House Prices
Q4 1995
-5.0
-10.0
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
%
Retail Sales (YoY)
20.0
15.0
10.0
5.0
0.0
1
2
-1
M
ar
-1
M
ar
0
-1
M
ar
9
-0
M
ar
8
7
-0
M
ar
-0
M
ar
6
5
-0
M
ar
-0
M
ar
4
3
-0
M
ar
-0
M
ar
2
1
-0
M
ar
-0
M
ar
Irish Consumer Confidence Falling Sharply
140
120
100
80
60
40
20
0
Breaching the rules
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Cupboard bare - no room fiscal expansion
Surplus of 3% ‘06 - deficit 6.5% ‘08 - 9% ‘09
EBR -€11.0 bln end-Oct (-€3.9 bln Oct 2007)
Yield spreads 100bp second only to Greece
Commission launched excessive deficit
procedure
• Management of public finances weakest of 18
EU states
Economic Recovery
Prospects
• Recovery prospects in 2010 contingent on
international recovery, bottoming out of
housing market & ending of credit crunch
• Ireland needs to restore competitiveness on
all fronts - wages, public spending, IT
capability, education & taxation
• Need real public sector reform - Budget 2009
nip/tuck, An Bord Snip II to come
• Back to the future - export dominated growth
• Strong political leadership now required
Recent Trends in
Pharmaceutical Industry
Pharma contribution
• FDI in pharma 40 years old
• €29.7 billion exports (40% of total
manufacturing exports)
• Direct employment 17,000
• Largest payer of corporation tax
• 13 top 15 companies operations in Ireland
• 6 out of 10 of the world’s top selling drugs
• Government, academia, and industry: r&d tax
credit, NIBRT, SFI
Recent highlights
• Wyeth Medica and Wyeth Biotech added
pioneering state of the art investments
• GlaxoSmithKline invested €250m in its
existing facilities in Cork and €30 million in
Waterford
• Merck Sharpe Dohme to develop a €200
million strategic vaccine facility
• Pfizer develops €353 million biological facility
in Ringaskiddy, Co Cork
• Teva to invest €65 million in its Ivax
pharmaceutical plant in Waterford
• 1,000 PhDs expected to graduate in 2008
Recent output volume trends
July 08-Sept 08
Manufacturing Output
-2.2%
Modern sector
-2.2%
Traditional sector
-2.1%
Pharmaceutical, medicinal
chemicals and botanical
products
0.4%
Issues for pharmaceutical
industry
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Thinning pipelines
Increasing cost and effectiveness R&D
Generic substitution
Eroding cost competitiveness
Impact emerging countries
The Obama factor
Innovation & flexibility essential - growing bio
sector
• Ireland: continued investment in education,
R&D
Words of warning
‘Financial stress that is rooted in the
banking sector typically has more
adverse economic effects than stress
in stock markets or exchange rates’
IMF October 2008
Thank you