UPharma Consulting presents the latest pharmaceutical market report - "Azerbaijan Pharmaceutical Market Overview 4Q 2018" (2018 FY). The report uncovers 2016-4Q 2018 historical data of Azerbaijan pharmaceutical market trends, pharmaceutical market forecast to 2021, healthcare and epidemiology statistics.
Azerbaijan Pharmaceutical Market Overview 4Q 2018 provides essential information on the economics, pharmaceutical market, and healthcare landscape in Azerbaijan, and comprises the following:
This article is based on the "Azerbaijan Pharmaceutical Market Overview 4Q 2018" report developed by UPharma Consulting and contains short excerpts from this report. The full report is available for purchase now.
The Republic of Azerbaijan (RA) is a country located in the South Caucasus region at the crossroads of Southwest Asia and Southeastern Europe. The country’s GDP amounted USD 46.7bn in 2018 (the 84th economy in the world rating).
Azerbaijan has built an oil-based economy, where the government plays a big role. However, in the early 1990s, the country was struggling as the disastrous conditions of the economy were complicated by the war conflict over Nagorno-Karabakh. After a ceasefire, in 1994, President of Azerbaijan Heydar Aliyev signed the “Contract of the Century” with the biggest western oil corporations on joint development of three major oil fields. In the late 1990s, the construction of strategically important international pipelines allowed to considerably improve oil exports.
Oil revenue substantially boosted the economic growth of Azerbaijan, improved people’s living condition, and accelerated the construction of infrastructures. Thanks to the booming oil sector, non-oil sectors were also stimulated in a favorable economic situation.
The high dependence of the economy on hydrocarbons output revealed in 2014 after the fall in world oil prices. However, Azerbaijan has been less affected by neighboring Russia’s economic problems than some other former Soviet states because it does not rely on Russia as much for the trade. Thus, the country managed to reserve growth and to restrain inflation.
In 2015, the government had to devaluate the national currency twice – by 24% in February and by 48% in December. A steep oil price decline in the 2H 2015 led to a deceleration of growth and economic recession. At the same time, the share of the non-oil part of the economy increased to 63.5%.
Throughout 2016, almost all of the economic indicators of Azerbaijan have been on a downward curve. The average monthly salary decreased to USD 313.2 from USD 455.0 in 2015, causing Azerbaijan’s losing of its status of a “middle-income country”. The sustained real growth of the GDP, which started in 2004, shifted to a sharp -3.8% contraction in 2016 with 14.8% inflation in the background.
Economic growth was nearly flat at 0.1% in 2017. The stabilization of the economy was driven by a recovery in non-oil GDP, which grew by 2.7%. Since April 2017, the manat-US dollar exchange rate has been maintained within a very narrow fluctuation band despite the recovery in the oil price. The current account switched from a deficit in 2016 to a surplus of 4.1% of GDP in 2017 on the back of higher hydrocarbon revenues.
Following the recession and stagnation of the economy of Azerbaijan in 2015-2017, a 1.4% growth was recorded in 2018. Economic growth has been mainly driven by the following factors:
Financial-banking and construction sectors continued to be the weakest parts of the economy. Poor access to financial resources and fiscal burdens have diminished the effectiveness of government policies for the improvement of small and medium-sized businesses.
The WB highly appreciated Azerbaijan’s success in improving its business environment in 2018. By virtue of implemented reforms, the RA rebounded 32 spots reaching 25th position among 190 states in the 2019 rating, getting the leading position among the CIS countries. Azerbaijan was among the Top-10 improvers globally by implementing 8 vital reforms to make it easier to do business in the country.Azerbaijan opened a single window at the Baku City Executive Office for dealing with construction permits, reducing the time and cost to obtain a building permit. Another one-stop shop – the ASAN Communal facility – streamlined the process of connecting to the electricity grid. To improve access to credit, Azerbaijan established a new credit bureau and a new unified collateral registry. Azerbaijan made paying taxes easier by introducing e-invoicing and a unified tax return for social security contributions and enhancing the online platform for filing corporate income tax. The RA was ranked 2nd in protecting minority investors topic and took the 9th position in starting a new business.
The pharmaceutical market of Azerbaijan is the biggest one in Transcaucasia (South Caucasus) despite the fact that the local pharmaceutical industry is very undeveloped. Before the collapse of the Soviet Union, there were republican wholesale companies which distributed drugs in Azerbaijan. After the country declared independence, the state wholesale companies were privatized. Currently, these companies, among which are AvroMed, Azeri Med, Certus Pharma, are one the main marketers and distributors of drugs in the RA. Wherein, local production of pharmaceuticals had almost ceased, which condemned the country to the big rely on imports.
There are only a few local pharmaceutical manufacturers in the country. Thus, about 97% of the market is filled with foreign drugs. The legislation of Azerbaijan allows for parallel imports, while the quality control is absent. This negatively affects the quality of drugs and causes a large number of counterfeit products in pharmacies.
The government is looking for ways to notably improve local production of pharma goods. It considers the pharmaceutical industry as an important non-oil sector of the economy with big growth potential. In 2015, the government approved the pharmaceutical industry development plan, which envisages the creation of a number of modern full-cycle manufacturing pants that meet international GMP standards. Within the project, in 2016, the government created the Pirallahi Industrial Park in Baku city, which provides tax preferences to pharmaceutical producers. Thereby, some foreign investors reached contracts with local partners on establishing common enterprises to produce pharmaceuticals in Azerbaijan.
In recent years, foreign companies started considering Azerbaijan not only as a market but also as a prospective place for the deployment of production facilities and a hub for accessing the pharmaceutical markets of neighboring republics, e.g. Turkey, Russia, Georgia, Kazakhstan, Turkmenistan, Iran, etc. The government’s favor should promote the development of local pharmaceutical industry in the following years. The launching of the plants in Pirallahi Industrial Park in 2019 is supposed to become a considerable incentive for the market development and attract even more investments in the pharmaceutical sector of Azerbaijan.
The Overview will upgrade your vision of the Azerbaijan pharmaceutical and healthcare environments by making you possible to: