As the world responds to the COVID-19 pandemic, Canada’s ICT spending is expected to shrink by up to five per cent in 2020, according to a new IDC report.
The IDC report predicted the optimistic, probable, and pessimistic scenarios.
“The probable scenario assumes the coronavirus is broadly contained by June. The optimistic scenario assumes the virus is more rapidly contained, and business and investments recover quickly and accelerate in Q3. Finally, a pessimistic scenario that considers a less controlled, longer-lasting, virus ‘rebound’ effect through Q3 and Q4,” said Tony Olvet, group vice-president of research at IDC Canada, in a press release.
IDC wrote that in the probable scenario, a slowed ICT supply chain from China would disrupt market supply for consumer devices and semiconductors. It also expects the unemployment rate to spike to as much as 10 per cent.
In the other two ends, the optimistic scenario hopes to see the virus contained by May and the economy stabilizing by the second half of 2020. In the pessimistic scenario, mass unemployment could further erode business investments and ICT spending to fall by as much as 8.2 per cent, assuming the governments could not effectively restore economic progress.
IDC indicated in its report that the pessimistic scenario is not a worst-case scenario, in which the virus could not be contained. It did not evaluate the potential economic impact in such a case.
Last week, 90 per cent of new COVID-19 cases in Ontario were deemed to be community spread. In response, Ontario and Quebec’s provincial government ordered the closure of all non-essential businesses to prevent the virus from spreading through crowd gatherings. IDC predicts that manufacturing, consumer services, transportation, and hospitality industries will be heavily curtailed as social isolation increases.
Nigel Wallis, IDC research vice president, commented that it’s still too early to assess the overall impact on the Canadian IT market fully, but has recommended that businesses adopt new strategies to cope with the decline.
On Wednesday, nearly one million Canadians filed for unemployment, accounting for five per cent of Canada’s total workforce.
The Globe and Mail this week reported that Rod Philips, Ontario finance minister, said it would be “impossible” to predict a multi-year projection at this time.
Constituting approximately 4.5 per cent of Canada’s total economy, Canada’s ICT sector has been growing steadily since 2018. Between 2012 to 2019, Canada’s ICT sector revenue grew from $156 billion to $193 billion, or by 23.4 per cent. Despite being a relatively small sector compared to the resources or production industry, the ICT sector had the highest R&D spending, totalling to $6.2 billion in 2018 alone.