Global Economics

Asia Safe From Global ICT Slowdown


Tech spending is set to slump in 2008 due to the U.S. economic downturn, but close ties to Asia may protect Australia and New Zealand

The drop in IT spending has been forecast because of a looming U.S. consumer recession, according to global investment bank Merrill Lynch. Research group IDC has predicted that global IT market growth will slide from 6.7 percent to a modest 5.5 to 6 percent in 2008--again as a result of the weak U.S. economy.

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"The U.S. is on the precipice of its first consumer recession since 1991, which was the last time the market suffered from a confluence of high energy prices, weakening employment conditions, real estate deflation and tightening credit," said David Rosenberg, Merrill Lynch chief North American economist in a statement on Tuesday.

Despite these concerns the bank has also predicted that the global economy will stay resilient in the face of turbulence in U.S. markets and embark on a "rebalancing" period, which could occur over a number of years.

According to Merrill Lynch: "Imbalances in the global economy, stemming from historic dependence on the U.S. consumer, have peaked and will unwind throughout the coming year... This 'rebalances' the growth within countries. At the heart of this rebalancing, which could occur over a number of years.

According to Merrill Lynch: "Imbalances in the global economy, stemming from historic dependence on the US consumer, have peaked and will unwind throughout the coming year ... This 'rebalances' the growth within countries. At the heart of this rebalancing, which could last several years, is the growing power of consumers outside the US."

The Asia-Pacific market is expected to remain largely unaffected by these changes. Analyst firm Gartner has predicted that IT budgets in the region "are expected to grow about 5 percent in 2008", according to CEO Gene Hall, speaking at the company's Symposium in Sydney a fortnight ago.

Marcus Blosch, research VP at Gartner, believes the US will go into recession but the relative strength of the Asian economies will help Australian companies survive.

"Personally I don't believe the outlook is too great for America next year. With China and Asia, the economies are so strong that we will be able to weather the storm.

"The old joke is that if America sneezes, Europe catches a cold and the same with Australia because we are very tight. Hopefully what will happen is that America will go through its recession but many of the companies in Australia and New Zealand will be immune to it because they have got closer links to Asia," said Blosch in a video interview last month.

Economic uncertainty in the US is one of a handful of "key disruptions" foreshadowing the predicted global IT market dip, according to IDC.

Other "disruptions" listed by IDC included open delivery, the growth of open source development and emerging markets.

"Disruptive technologies have been a persistent theme in IDC's predictions over the past several years," said Frank Gens, senior vice president of research at IDC.

"These technologies have been creeping into everything from enterprise software and hardware to consumer gadgets and telecom services, forcing vendors to rethink their offerings," he said.

IDC's latest announcement on the year ahead for IT markets falls closely in line with those predictions cast by Merrill Lynch for the global economy at large as Gens has indicated that what are currently considered "disruptions" will go through a normalising process in 2008 as market leaders "jump in with both feet" to these emergent trends, setting the scene for what the firm has dubbed as "the post-disruption marketplace".

"In 2008, the era of experimentation will end as industry leaders get serious about transforming their products and services to take advantage of -- and meet the challenges posed by--these new technologies and business models. The status quo is about to change," said IDC's Frank Gens.

Provided by ZDNet Asia—Where Technology Means Business

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