Saudi Arabia confronts a gradual economic recovery in 2021, which will put persistent pressure on non-COVID-19-related spending in the healthcare sector. The need for procurement spending controls will be partially offset by the need for continued investments in the country’s COVID-19 healthcare response and healthcare infrastructure, but long-term risks to fiscal conditions remain in place as a full global demand recovery remains in danger. Reform efforts will continue to gradually guide healthcare policy in Saudi Arabia, with privatization and corporatization remaining key pillars for policymakers over the medium term.

Continued fiscal support and a gradual recovery of reform momentum and private sector growth will dictate the 2021 healthcare outlook. Three key trends are emerging in the healthcare sector and can help set up your business for success coming into 2021.

Trend 1: The 2021 budget is unlikely to entirely protect healthcare spending priorities

The government’s wider budget intentions demonstrate a reversion back to austerity measures, which should still consider the healthcare sector’s needs in the COVID-19 environment but will force healthcare companies to take a cautious approach to spending expectations from the Ministry of Health and National Unified Procurement Company (NUPCO).

Trend 2: Gradual recovery awaits the private health market in 2021

While the health insurance sector’s financial performance has remained strong throughout this crisis, a gradual recovery in labor market participation and expat levels, as well as questions about government reform measures, will add a certain degree of uncertainty to the sector and healthcare spending coming into 2021.

Trend 3: Industrial policy agendas will have long-term implications for healthcare companies

The COVID-19 crisis has underscored the need to both diversify Saudi Arabia’s economic base and ensure sufficient access to essential healthcare supplies. Both factors will play a strong role in redoubling the government’s efforts to drive private investment and localization in both industries, with the pharmaceutical sector likely to experience continued prioritization.

Actions for businesses to stay ahead of the curve in 2021

  • Adapt 2021 sales targets to Ministry of Health priorities delineated in forthcoming budget guidelines.
  • Assess the risks, if any, of government investment priorities in healthcare service privatization and manufacturing localization.
  • Ensure that you are monitoring the signposts for persistent oil price pressures and the direct and indirect impacts of COVID-19 on your Saudi business.
  • Pressure-test assumptions through scenario-based methodologies, preparing for potential changes in the pace of reforms in healthcare spending.
  • Ensure that consistent engagement with key stakeholders in the public and private healthcare markets provides visibility into NUPCO’s procurement policies and the government’s reform agenda.

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