A brief recession and the devaluation of the local currency have demonstrated that Belarus has not been able to escape the global economic crisis, although sheer lack of integration into the global financial system has done much to blunt its impact. According to the report, the country’s pharmaceutical sector is forecast to deliver a five-year compound annual growth rate (CAGR) of 6.47% through to 2013 in US dollar terms (10.75% in local currency terms), with total market value in final consumer prices set to reach US$869mn. At the same time, the market will not see US dollar growth return until 2011, when the market is expected to resume its previous double-digit growth.

Relations with Russia remain central to overall strength of the Belarusian economy. After a damaging trade row in July, President Alexander Lukashenko has been eager to push for the implementation of the Customs Union between the two countries from January 2010, with Kazakhstan also committed to join.

In terms of competitiveness, the devaluation of the Belarusian ruble helps domestic companies match production costs in Russian and Kazakhstan. In addition, producers and companies in all three regions face similar increases in active pharmaceutical ingredient (API) costs, as much of these are imported from China and denominated in dollars. The union is meant to also negotiate as a bloc for the three countries to enter the WTO, although membership for Belarus appears extremely unlikely in the near term.

The market remains under the influence of the pricing freeze agreed between producers and the government in June. The move followed the 25% fall in the value of the ruble against the euro in late 2008/early 2009. Companies are now required to obtain permission from the Ministry of Public Health before raising prices, while wholesalers and retailers have to apply minimal mark-ups. Still, BMI sees real prices continuing to move upwards as wholesalers and retailers seek to survive in difficult economic conditions.

Local producers must calculate how to balance the short-term impact of the recession with the threats and opportunities offered by the Customs Union if it becomes reality in a few months, which is by no means certain. Big producers such as Bebliopharm’s sales match the pace of market growth in recent years, large Russian producers in particular will be challenging many of their core product lines – although even with a Customs Union, few believe that the Belarusian government will remove non-tariff discrimination.

Thorny issues with Russia remain. In particular, the government has resisted applying rules giving Russian pharmaceutical firms equal access to state tenders. In July, the government introduced new rules aimed to introduce preferential treatment for domestic producers, reversing liberalising measures introduced in April. Despite government rhetoric, liberalisation within the Customs Unit and integration within the broader global pharmaceutical market look a long way off.