Regional IT spending to grow 5.1% to $110.94b this year

Growth rate in consumer sector set to slow down due to challenging economic climate

Gulf News

Dubai: Information technology spending in the Middle East and Africa (MEA) is forecast to reach $110.94 billion (Dh407.38 billion) this year, registering a year-on-year growth of 5.1 per cent, according to International Data Corporation (IDC).

Overall IT spending reached $105.51 billion in 2015, with consumers accounting for just over $50 billion of the total, or 47.6 per cent.

Jebin George, a senior research analyst at IDC, said that the consumer sector exhibited strong growth over the 2012–15 period, with spending increasing at an annual rate of 19.1 per cent.

However, he expects the growth rate to slow considerably to 3.5 per cent for 2015–20, with faltering smartphone demand largely to blame.

“The high rate of growth seen in the consumer sector over the last few years was driven by a surge in demand for smartphones, with the devices accounting for a majority share of consumer spending,” he said.

Regional mobile phone shipments in the second quarter totalled 23.9 million units, representing a 15.9 per cent slump when compared with the corresponding period in 2015.

“Given the slower rate of innovation and change in each new smartphone iteration, consumers are finding it increasingly difficult to justify expensive upgrades. We expect mobile phone sales in the Middle East to stop contracting soon, the turnaround anticipated for the fourth quarter of the year is likely to be more muted than the industry might hope,” said Nabila Popal, research manager at IDC.

Moreover, George said that the market saturation and a challenging economic climate have led to a slowdown in demand for new smartphones, a trend that is expected to continue over the coming years,” he said.

The research firm expects the IT spending to total $133.56 billion in 2020, expanding at an annual growth rate of 4.8 per cent over the 2015–20 forecast period.

IT spending in the UAE is expected to grow to $9 billion this year compared to $8.7 billion last year.

George said that regional spending by the business sector is expected to total $57.69 billion in 2016, with an annual growth rate of six per cent through 2020.

The telecommunications ($12.88 billion), finance ($9.27 billion), government ($8.85 billion), and manufacturing ($7.13 billion) sectors will account for the largest share of spending this year.

The fastest-growing sector over the coming years will be health care, with an annual rate of 7.9 per cent over the 2015–20 forecast period.

George said that organisations across the region are increasingly focusing on reducing costs and driving efficiency improvements as they try to come to terms with the prevailing economic environment.

“Businesses no longer see IT as a cost centre, but rather as an enabler of innovation and efficiency, and this change in perspective is helping to drive IT spending growth in the region,” he added.