According to the TechGPT analysis by a Swiss bank and financial institution UBS AG, the Middle East’s digital economy will increase from $180 billion in 2022 to $780 billion in 2030, or nearly 20% growth annually. The digital economy is anticipated to grow from 4.1% of the region’s GDP in 2022 to 13.4% in 2030, only slightly falling short of the 15% level observed in the US.
Thanks to significant new investments made during and after the COVID-19 outbreak, the Middle East now ranks among the digital economies developing the fastest globally. According to the report, the region is now where China was 10–15 years ago, and India was 5–10 years ago when the digital inflexion started.
According to the estimates, the report has recommended investors consider participating in the region’s recent developments over the next ten years in two ways. The first step is to invest correctly in sectors like software, the internet, and data centres.
The 2nd way, Investing in equity/venture capital firms, is another avenue for international players to profit from the Middle East’s growing digital economy.
The report claims that software is the most effective approach to participate in the region’s continuing digital transformation because many traditional businesses would need to improve their IT infrastructure to keep up with the trend. Therefore, software spending in the Middle East is anticipated to expand by 15% annually, followed by internet-based businesses with a CAGR of 23.5%. The third segment is the data centres, where significant investments in generative AI are anticipated in the next few years.
The Middle East is still in the early phases of managing antitrust, competition, labour, and pricing-related regulations. Therefore, the research highlighted principles as a worldwide concern when discussing the dangers associated with investing in the region’s digital economy. The region has to develop a strong local talent base, particularly a robust developer ecosystem, to compete with major global talent pools like Silicon Valley, China, and India. Talent is another issue.
A further risk for investors considering investing in Middle Eastern businesses still losing money is the path to profitability. As we see many tradeoffs, there will constantly be a struggle between the two priorities of growth and profitability.
Furthermore, because the region mostly depends on the West for essential technology like semiconductors and software, geopolitical tensions between the US and China underline the necessity for the region to be self-sufficient. Data privacy is one of the most critical hazards, given the region’s high risk of cybersecurity breaches. Data breaches cost $8.07 million in the Middle East in 2023, up 8.2 percent from $7.46 million in 2022, per IBM Security and Ponemon Institute research.
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