By Vivian Yeo
Monday, April 07 2008 06:57 PM
URL: http://www.zdnetasia.com/news/business/0,39044229,62039904,00.htm

update A further downward spiral of the U.S. economy will cause IT expenditure in the Asia-Pacific region including Japan, to shrink by as much as US$20.5 billion over the next two years, according to a new report.

Gary Koch, associate vice president of IT spending research in the Asia-Pacific region at IDC, said in a statement Monday that a further slide in the U.S. outlook will have a substantial impact on IT markets in the region.

This is on top of a more conservative market forecast by IDC previously. In December, IDC reported that ICT spend by the Asia-Pacific region excluding Japan will reach US$154 million in 2008.

"Economies with greater participation in fulfilling U.S. consumption will feel the brunt of a continued downturn more than others in the region," said Koch. "However, industrial production growth and favorable levels of business investment and public sector spending in several parts of the region will soften this downward pressure on IT spending."

The U.S. market decline could lead to two possible scenarios, IDC expects.

Its more optimistic expectation would be that the market shrinks by US$4.8 billion this year, and US$7.5 billion in 2009. For that to take place, the U.S. economy would need to register at least two quarters of negative GDP growth, said Koch.

Alternatively, in a worse-case situation, IT expenditure in the region could contract by US$7.9 billion within the year, and up to US$13.6 billion next year.

The more pessimistic outlook could lead to countries such as Korea and Taiwan, experiencing negative growth rates for 2008, according to IDC. China and India, on the other hand, enjoy a sizeable market, which helps to moderate the impact of the decline in absolute dollars.

The regional IT market will experience moderate growth of 3.1 percent this year, and 5.5 percent in 2009, predicted IDC.

Koch told ZDNet Asia that the forecast was for total IT expenditure, including hardware, software and IT services. "Hardware generally will feel the brunt of a downturn much earlier than either services or software, so if it is just a mild recession in the U.S., the IT services market should not be as greatly influenced as perhaps the server and PC segment of the market.

"Growth of IT services is traditionally supported by longer term contracts that are in place," Koch explained in an e-mail.