The digital economy is expected to hit $16.5 trillion by 2028, equating to 17% of global gross domestic product (GDP), according to a recent report from Forrester. With the rapid growth of online retail and travel services, the digital economy has become a permanent fixture in the lives of many. At the same time, marketers continue to attempt to keep up with digital trends, to varying levels of success.
“Almost two-thirds of the global digital economy comes from the U.S. and China. Online retail and online travel will increase their share of the global digital economy and see 9% and 7% CAGR from 2023 to 2028, respectively,” per the report.
The report, “Global Digital Economy Forecast, 2023 to 2028,” was created through research-based estimates and drawn from interviews, public financial documents and Forrester’s own research.
Digital economy growth can be boiled down to four main areas: digital businesses, digital skills availability, digital public services and digital research and development. How growth spreads across these different areas varies by region.
“Digital economies vary widely by country, by 2028 the digital economy will drive 31% of South Korea’s GDP but only 10% of Mexico’s and 8% of Brazil’s. South Korea has the largest and one of the most balanced digital economies across consumer and business spend, with significant room for government and enterprise tech spend growth in China and consumer digital spending in Australia,” per the report.
Digital businesses, many of which are funded by advertising, are a major driver of growth. Putting a price on free advertising-driven digital goods would increase the size of the digital economy by 25%. Room for growth remains, especially in the EU, where just 45% of enterprises have adopted the cloud and only a third use data to improve decision making.
As digital businesses grow, so does the demand for talent. Cybersecurity had 3.5 million unfilled jobs in 2023. Worker shortage may prove to be a significant challenge for the digital economy, including stalling efforts for greater automation.
It is important to note that tech spend will not only come from private companies. Nearly 20% of tech spend in the U.S. will come from the government. In order to successfully scale the global economy, tech spend on public services must reach $881 billion by 2024.
However, one of the defining features of a strong digital economy is research and development.
“The average total tech spend growth per year in Europe from 2024 to 2027 is forecast to be €83 billion, significantly lower than the €125 billion required by the European Commission to reach digital growth targets,” the report stated.
However, it is important to note that not all digital economies are the same. There are three types of digital economies, each driven by a different factor: consumer e-commerce, technology spend and information and communication technology (ICT) export.
China and Australia lead the e-commerce-driven digital economy space. Consumer spending on retail and travel is the largest share of digital economy spend in these countries. Countries with much lower shares of online spending which are expected to see the most growth. Economies poised for significant e-commerce growth include Mexico, India, Spain, Italy and Brazil.
While China and Australia choose to invest in e-commerce, European countries including France, Italy, Spain and Germany, along with Canada, Brazil, the U.S. and the U.K. choose to invest in technology. European countries tend to invest more heavily in cybersecurity and software investments, according to the report. The U.S. is of particular note, as the country makes up only 4.2% of the global population yet is predicted to contribute 42% of global technology spending.
However, technology spend does not necessarily equate to competitiveness or innovation. While 45% of Japan’s digital economy comes from technology spending, its overall spend is behind the global average. Of 64 countries surveyed on digital competitiveness, Japan only ranked 32nd, China ranked 19th and South Korea ranked 6th, per the report.
India, South Korea and Mexico lead the way in ICT product and service exports. Nearly 45% of India’s digital economy comes from ICT exports, and the country’s IT industry experienced a 15.5% growth in 2022. Mexico is of particular interest, as it is the fourth-largest exporter of ICT products, behind only China, the U.S. and South Korea.
(Copyright: MarketingDive The digital economy is poised to grow: Here’s what the numbers say | Marketing Dive)
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