IT industry woes slowing global economy

The global economic decline in 2001 was mainly due to the slump in the IT industry, which will continue to retard any sort of recovery in 2002, the World Trade Organization (WTO) said in its latest economic report.

WTO economists predict a moderate recovery of no more than one per cent in 2002, specifically because of “sober prospects” for the IT industry, the WTO said in a statement Thursday.

The statement was released along with chapter two of the WTO’s annual report. The bursting of the IT “bubble,” coupled with sluggishness in economic activity in Western Europe and “to a much lesser extent” the repercussions of the terrorist attacks in the U.S. on Sept. 11, led to an “almost simultaneous” slowdown in the three major economies of North America, the European Union and Asia, beginning in the third quarter of 2000, the report said.

The entire report will be published in June, the WTO said.

“The bursting of the IT bubble led to a contraction of IT-related investment and contributed to the stagnation of total investment expenditure in the developed world last year, contrasting starkly with the high investment growth rates in the proceeding years,” the WTO report said.

The U.S. and East Asia were the hardest hit by export declines in 2001 because those are the regions and countries trading most intensively in IT products, the report said.

East Asian countries like Singapore and Chinese Taipei that specialize in the production of office and telecom equipment were “dramatically” affected by the decline in IT investment and “the less dynamic private consumption of IT products” worldwide, the WTO said.

In contrast, countries that are less reliant on IT exports, like China, India and Brazil, recorded strong export growth in 2001, the report said.

In 2001, global sales of semiconductors fell by 29 per cent from the preceding year to US$146 billion, with capital spending in the sector experiencing similar declines, the WTO said.

Shipments of personal computers worldwide experienced the first decline since 1985, falling 4.6 per cent to 128 million units shipped in 2001, while sales of mobile phones fell by three per cent to just under 400 million units, the report said.

“Owing to the lack of detailed investment expenditure data at present, one has to recur to industry statistics to illustrate the depth of the cut in IT-related production and investment,” the WTO said.

According to WTO estimates, the volume of world merchandise trade contracted by one per cent in 2001, the first decrease in over a decade. In contrast, 2000 saw an 11 per cent increase in volume — the biggest rise in the past decade. The value of the world export trade fell by four per cent to $6 trillion in 2001, the largest annual fall since 1982, the WTO said.

The estimated six per cent growth in the volume of global trade between the fourth quarters of 2001 and 2002 will only just make up for last year’s declines, the WTO said.