Malaysian private hospitals' profits to surge as tax cuts roll in

Healthcare spending will jump by 12.4%.

Malaysia’s private healthcare sector will get a much-needed boost from the government’s decision to scrap its 6% goods and services tax (GST) starting June this year.

A report from BMI Research stated that with the abolishment of GST, the profit margin for private healthcare service providers is expected to jump significantly given that they have been absorbing the 6% GST input tax on medicines.

“The healthcare sector will benefit from recovery in private consumption which will lead to higher spending on private healthcare,” the report stated. “In 2017, healthcare expenditure in Malaysia was valued at MYR60.12bn (USD14.15bn). We forecast health expenditure will experience a five-year CAGR of 9.0% in local currency terms and 12.4% in US dollar terms, reaching MYR92.69bn (USD25.39bn) by 2022,” it added.

The private healthcare sector will also benefit from the government’s MYR500 (USD124.8) monetary assistance to lower income earners.

“This will improve healthcare affordability and help price-sensitive patients switch back from public to private healthcare. The Malaysian healthcare sector will experience robust growth driven by the country's concerted effort to improve the health and well-being of its population,” the report said.

The pharmaceutical companies are also set to benefit from a higher expenditure on healthcare, with the government announcing that it will re-assess the annual budget allocation to the healthcare sector with the aim to increase the allocation to the health ministry from the current 4.5% to 6%-7%.

The pharmaceutical sales totalled MYR8.99bn (USD2.12bn) in 2017 and spending is estimated to increase to MYR11.11bn (USD3.04bn) by 2022, equating to a compound annual growth rate (CAGR) growth of 4.3% in local currency terms and a US dollar CAGR of 7.5%.