Discover the latest trends in the global digital economy, including growth drivers, regional variations, and business opportunities.
According to a recent report from Forrester, the digital economy is expected to hit $16.5 trillion by 2028, equating to 17% of global gross domestic product (GDP). 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 degrees 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 based on research-based estimates and drawn from interviews, public financial documents, and Forrester’s research.
Growth drivers
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 spending, with significant room for government and enterprise tech, spending growth in China, and consumer digital spending in Australia,” per the report.
Digital businesses, many 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. In 2023, cybersecurity had 3.5 million unfilled jobs. A worker shortage may significantly challenge the digital economy, stalling efforts for greater automation.
It is important to note that tech spending will not only come from private companies. Nearly 20% of tech spending in the U.S. will come from the government. To successfully scale the global economy, tech spending 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.
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- $83 billion – The projected total tech spend per year in Europe from 2024 to 2027.
- $125 billion – The investment required to meet digital growth targets.
Top dogs
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 spending, 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 spending in these countries. Countries with much lower shares of online spending 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, Germany, Canada, Brazil, the U.S., and the U.K., choose to invest in technology. According to the report, European countries tend to invest more heavily in cybersecurity and software investments. 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 spending does not necessarily equate to competitiveness or innovation. While 45% of Japan’s digital economy comes from technology spending, its overall spending is behind the global average. Of 64 countries surveyed on digital competitiveness, Japan ranked 32nd, China ranked 19th, and South Korea ranked 6th, per the report.
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India, South Korea, and Mexico are the leading countries 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 particularly interesting, as it is the fourth-largest exporter of ICT products, behind only China, the U.S., and South Korea.