Wall St rout seen squeezing Asia tech spending-IDC

By : |July 28, 2002 0

SINGAPORE: The recent rout on Wall Street is expected to impede the global economic recovery and squeeze technology spending in Asia, research consultancy International Data Corp (IDC) said on Friday.

IT spending in the Asia-Pacific region excluding Japan was projected to grow six to seven percent to about $70 billion to $70.6 billion in 2002, versus an earlier eight percent forecast, according to IDC Asia-Pacific managing director Piyush Singh, in a Web cast.

“Assuming the Dow stays below 10,000 in the next six months, the economic recovery will be slower than anticipated and the 2002 IT market growth figure will be cut by one to two percentage points,” he said.

Year to date, the bellwether Dow Jones industrial average has sunk more than 18 percent, while the tech-laced Nasdaq Composite Index has tumbled more than 36 percent.

Although Asian stock markets have been more resilient and the region weathered the 1997-98 financial crisis, which sparked a clean-up of corporate balance sheets, economies were still interconnected globally, Singh said.

It was the second downgrade IDC made on its forecast for IT spending growth in the region. It had projected 9.5 percent at the start of the year.

“The key reason for our downgrade was the slowdown in the PC market, especially in China,” Singh said.

“Consumer purchases of PCs in China slowed, with a 30 percent penetration rate in the top five cities, while replacement cycles are yet to kick in.”

PCs account for about 33 percent of regional IT spending.

China’s IT market is expected to expand by 13 percent this year, down from 17 percent in 2001. It will bounce back with a 24 percent rise in 2003, boosted by PC replacement cycles and increased government spending, Singh said.

In 2003, Asian IT spending is expected to rebound with growth of 16.4 percent.

Software and IT services will be the main drivers in 2002, as PCs and servers remain weak.

IDC has forecast 3.7 percent growth for worldwide IT spending in 2002, rising to 8.7 percent in 2003.

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