Demand drivers and trends in Asia
With real GDP growth rates almost double the global average (5.70% compared to 2.30%[i]), Asia will be a prime driver of global economic growth going forward. At real GDP growth in the range of 5–8% in Asia annually, and with healthcare projected to remain at a constant or growing percentage of GDP, we expect to see a rise in healthcare spending in absolute terms across the countries in the region.
China, India and Indonesia lead with the highest expected real GDP growth and largest populations. Philippines may be one to watch as relatively high macroeconomic growth is expected, while healthcare spending as percentage of GDP is projected to hold steady, at a relatively decent 4.6% going forward.
Rising middle class increases demand for hospital services
“By 2030 Asia will represent 66% of the global middle-class population and 59% of middle-class consumption, compared to 28% and 23% respectively in 2009.” – OECD
With rising income levels comes increased purchasing power and choice. A rising middle class not only increases the affordability of healthcare, it also drives consumer preferences for quality and standards of healthcare services.
For instance, a trend in global healthcare recently is the gradual shift in focus from “sick care” to “wellness”, with people being more aware of preventive medical technologies and treatments, and more willing and able to pay for quality healthcare. These factors have led to an overall increase in the number of patients going to specialty clinics for personalized treatments. We expect this trend to drive growth in number of specialty clinics being built in urban Asian cities.
The increasing wealth, coupled with sedentary or stressful lifestyles, have led to higher prevalence of chronic diseases. Worldwide, deaths caused by chronic diseases including cancer, diabetes and hypertension have skyrocketed in the past decade and will likely continue to do so. The demand for hospitals that deliver care to such conditions will therefore be on the rise.
A gauge of hospital activity is the number of surgical procedures done in hospitals. According to Clearstate estimates, the number of surgical procedure volumes2 in Asia has been growing steadily at a compound annual growth rate (CAGR) of more than 5%, particularly in China and India. The largest volumes are in the areas of obstetrics and gynaecology, with more than 60 million procedures done in 2012. The CAGR for surgical procedure volumes for the next two years is projected to increase to 5.57%, indicating a likely increase in demand for hospitalization and corresponding services.
Ageing population focuses demand on elder care
According to the United Nations, the proportion of people over the age of 60 in Asia is projected to increase from 11% in 2012 to 24% in 2050. For Indonesia, the increase is expected to be almost four-fold, from today’s 20 million to over 74 million in 2050. The ageing population not only increases the overall demand for healthcare services, it will also impact the provider segments that may be of interest to investors, such as elder care.
The Singapore government has announced that it will spend more than S$ 500 million (US$ 409 million) over the next 5 years to build more such facilities to support the needs of an increasing ageing population. In China, there are already active investments in elder care and retirement facilities made by funds such as the Fortress Investment Group.
An ageing population will also impact the areas of need, such as in diabetes, macular degeneration, or bone related problems (arthritis and osteoporosis). For example, in India, the number of osteoporosis cases is expected to be 36 million in 2013. In China, more than 70 million are affected by osteoporosis. In the past year alone more than 90,000 hip replacement surgeries3 have been carried out.
Stayed tuned for the next segment in the series: Supply drivers and trends in Asia
Tej Deol, M.D.
Category: Top Story
