The global IT industry is likely to see increased growth, particularly in Asia, but growth in New Zealand will be much slower than its neighbours in the region, one economist says.
During his presentation last week at Directions 2004 conference, IDC research manager Kevin White said that IT growth in the Asia-Pacific region is likely to run at 10 per cent to 11 per cent annually in coming years, driven by outsourcing and increased development of IT infrastructure. New Zealand, however, a country which already has an advanced IT environment, is likely to grow at five per cent annually.
“We’re very optimistic about the region,” White says. “More than any other region in the world, Asia is best placed to profit from an upturn in the U.S. economy.” Although Japan is still struggling with bad debts and a shortage of available finance, it has “been surprising everybody” in recent months.
Its economy grew at a seven per cent rate in the last quarter of 2003. Chinese government efforts to cool its economy could also backfire, White says, and political unrest could hurt local economies.
“And if Japan does stumble, certainly there will be repercussions in the rest of the region as well,” he says. “But overall the outlook is really positive for Asia-Pacific.”
New Zealand’s projected annual IT growth rate of five per cent is lower than both the U.S., at 5.5 per cent, and Europe, at six per cent. Developing countries such as India, China and Pakistan could grow as much as 20 per cent annually.
The American IT sector is showing “cautious optimism”, he says. Positive indicators include economic recovery, growing profits, a healthier stock market and industry momentum. On the downside, SARS, oil shocks, terrorism and war and the global economic imbalance have a negative effect.
“There are signs of recovery,” he says. “Things are starting to look up, although that’s small comfort after the crash of the last few years.” The IT outlook in Europe is less healthy, White says, blaming conservative financial policies and higher inflation, interest rates and unemployment. Although Britain looks in better shape, growth has been driven by a housing boom that could be temporary.
“Some people would call it a housing bubble,” he says.
Looking ahead, White says economic necessities are likely to drive IT growth. The aging population is developing countries will place increased strain on developed economies. In 2040 in the U.S. workers will be outnumbered by dependents.
“There will be a lot less people working on the tax base and a lot more requirements of the system,” he says. “I believe that IT is going to be increasingly viewed as the solution to the demographic crunch.”
IT is also crucial to the global economy, making cross-border commerce, share trading and capital flow possible, White says. Developing countries wanting to be part of the global trade — particularly outsourcing — will need to further develop their IT infrastructures, he says.