Assessing the Impact of the Greek Debt Crisis on IT Spend in Europe
This study presents IDC's estimates for IT spending in Western Europe and Greece for two scenarios.
Scenario 1: Greece will proceed with the bailout terms and conditions laid out by its European counterparts and will keep the euro currency. Despite this agreement, the resulting drop in business confidence will mean a double-digit decline in IT spending in Greece in 2016, albeit at less accelerated rate than Scenario 2. Overall Western European IT spend will remain largely unaffected.
Scenario 2: Greece is not able to comply with the terms of the 3rd bailout and an exit from the Eurozone will materialize. As a result, IT spend in Greece will see a significant decline. European IT spend will be somewhat affected, but not enough to move current expected growth rates into negative territory.
"The first scenario, even if less than the second one, will strongly hit many Greek industry sectors," said Andrea Siviero, senior research analyst, IDC European Industry Solutions. "The public sector will be the most negatively impacted vertical market in terms of IT spending in the short term, due to the dramatic cut in public spending that will characterize the coming months. But the consumer and, as a consequence, retail sectors will also experience a very tough IT spending cut. Tourism and accommodation, a sector that accounts for almost 15% of the national GDP in Greece, is suffering from the uncertainty of recent months. Nevertheless last month's vicissitudes could attract foreign attention in the longer-term."
With respect to IDC's current forecast, the Grexit scenario is expected to reduce total Greek IT spending for 2015 by 15%, decreasing from $2.6 billion to $2.2 billion. IDC also estimates that a Greek exit from the common euro currency would see Greek IT spending spiral to an 18% decline in 2016. Looking ahead to 2019, the actual forecast predicts a very small decline for 2105-2019 Greek IT spending (-0.4%), while the probability of a Grexit would increase the size of the IT spending reduction to 25%. In terms of the cumulative negative impact, a potential Grexit would reduce Greek IT spend by $3.7 billion in the forecast period. Western European IT spending would also be negatively impacted, but in a more contained fashion with less than a percentage point decline in terms of overall growth for the revised 2016 forecast.
"While macroeconomic shocks such as a possible Grexit tend to affect most technology areas, and we believe that hardware spending in the country will see a stronger negative impact especially in the 2015-2017 timeframe, as recurring maintenance fees and multi-year contracts will protect software and services, at least to some extent", said Giorgio Nebuloni, associate research director, IDC European Infrastructure and Software.
"Tracking IT spend in Greece back to 2007 (its pre-crisis peak), we have already seen a one-third reduction of IT spending compared to 2015," said Tom Meyer, GVP of European IT Research. "The current situation leads IDC to forecast a further drop in IT spending for 2016 if Greece leaves the Eurozone, reaching an extent where we could see an overall reduction in annual IT spending between the peak in 2007 and 2016 of nearly 50% (or just under $2 billion). Despite this, we do expect the recent resilience in IT spend seen in the other European markets to sustain reasonable growth in either of the scenarios for the broader region through the course of the forecast period."
Please Note: Extended description available upon request.