The United Arab Emirates and Saudi Arabia are forecast to be among the biggest markets for information technology (IT) spending in the Middle East and Africa in 2018, while Egypt is expected to become a major regional IT player in the coming three years, an industry expert said.
“In the last couple of years, we have started to see some improvement in the overall economic forecasts (of Saudi Arabia, the UAE and Egypt),” Jyoti Lalchandani, vice president and regional managing director for the Middle East, Africa and Turkey in the International Data Cooperation (IDC) told Zawya on the sidelines of a market outlook event held by IDC in Dubai on Tuesday.
Saudi Arabia predicted its economy will grow by 2.7 percent in 2018, up from a contraction of 0.5 percent in 2017, while the UAE economy is expected to rise 3.9 percent in 2018, up from 1.6 percent last year, according to two Reuters reports quoting official data and government executives.
On Tuesday, the International Monetary Fund (IMF) raised its economic growth forecast for Egypt’s fiscal year 2017/18 ending in June 2018 – to 4.8 percent from 4.5 percent announced in October, the IMF said in a report sent to the media on Tuesday.
Data released on Tuesday by the IDC, which provides research and analysis on the technology industry across the world, showed that the UAE and Saudi Arabia will be two of the four biggest markets in the Middle East and Africa for consumer IT spending this year. The UAE is expected to grow by 4.8 percent this year, to $7.7 billion. Spending grew by only 0.9 percent in 2017. Meanwhile, IT spending in Saudi Arabia is expected to grow by 4.3 percent this year – after a 3.6 percent contraction last year – to a total of $11 billion.
IDC data also showed Egypt’s IT spending is forecast to stand at $4.4 billion this year and grow by around 6 percent in the longer term from 2016 to 2021, becoming the fastest-growing market in the Middle East, Africa and Turkey region monitored by IDC, which includes Iran and Pakistan, but excludes Israel.
Lalchandani said the expected increase in IT spending in Saudi Arabia and the UAE, the Middle East’s two biggest economies, is due to overall economic progress on the back of the stabilisation in oil prices, the introduction of new sources of revenues such as the recently implemented value-added tax (VAT) and the two states’ ambitious economic plans.
The economies of many Gulf Arab states especially Saudi Arabia, the world’s top exporter of oil, were badly harmed by the steep decline of the global oil prices that started in 2014, but the economies have been gradually improving after a steady increase in oil prices during the course of last year.
Saudi Arabia announced in 2016 a national vision to transform its economy, while the UAE over the past two years has announced a number of initiatives to develop and support innovation.
In Egypt, the country’s recent IMF-backed economic reform moves will help lift the state’s economy, Lalchandani said. The economy of the Arab world’s most populous nation was negatively impacted by a wave of political turmoil that followed the eruption of the Arab spring protests in Egypt in 2011. “Ninety percent of the spending is still very much on building (the IT) infrastructure like PCs, (personal computers), servers, storages and devices and so on, and only 10 percent of the spending is on utilising infrastructure in terms of applications, software, services, which means that the penetration of IT or ICT (information and communications technology) has a huge way to go and there is a lot more to do,” Lalchandani said.
“And that is one of the reasons we believe if we have stable economic growth of somewhere 4 to 5 percent that (has) been projected in Egypt for the next three to four years, that can really help in stabilising the market and increase the overall spending, and we believe based on that, Egypt will be one of the fastest-growing markets,” he added.
Lalchandani said political stability in Egypt will further help boost investments in all sectors including IT. Egypt is due to hold a presidential vote next March, which current President Abdel Fattah al-Sisi is widely expected to win. Al-Sisi announced on Friday he will run for a second term in office, Reuters reported.
“From what I have read and after speaking to senior executives in the industry, it seems that from the political standpoint, there will be no major changes… no major political transition,” Lalchandani said.
Cloud and analytics
According to Lalchandani, the government sector will witness the strongest technological growth in the UAE and Saudi Arabia in the coming years, following greater investment in cloud technologies and data analytics.
“Cloud … You will also see dramatic growth in it, an excess of 20-25 percent,” Lalchandani said. Cloud is an on-demand computing service that allows users to store, manage, and process data on remote, hosted servers instead of having to buy or rent their own local servers.
“Other area (forecast to attract big IT spending) is analytics, we are seeing great investments in cognitive in certain sectors… like banking and financial services, telecommunications. And the public sector is also investing quite heavily (in it) especially here in the UAE,” he added.
Lalchandani said spending on IT security systems is also expected to hike this year in Saudi Arabia and the UAE after the introduction of VAT this month, as companies will file their tax returns online.