Economic Outlook for Global Technology Markets

The global economy appears to have stabilised in recent months, with a lower risk of recession and increasing possibility of a ’soft landing’, although downside risks such as the Israel-Hamas war continue to cast a shadow over the short term outlook. Even if a recession does unfold in the next 6 months, key business initiatives—like cloud, future of work, and digital transformations—act as tentpoles for IT demand overall, and the emergence of AI is one reason that ICT continues to be identified as a key strategic priority alongside its role as a driver of short-term productivity and efficiency.

Higher interest rates on financing for capital purchases are having a negative impact on some hardware categories, where constraints have shifted from supply to demand —especially PCs. On the other hand, the emergence of Gen-AI is driving stronger investment in some server configurations, and the easing of supply constraints boosted shipments of network equipment in the first half of 2023. Cloud, security and AI-related investments in software and services continue to post strong growth.

The US has been very resilient so far in 2023 and remains on course for a 'soft landing' from inflated growth in the last two years. However, growth in China has been weaker than forecast so far this year, and this is impacting the short-term outlook for the APJ region. In EMEA, Western Europe is showing signs of vulnerability with Germany in recession for the second time in three years, while CEE remains heavily affected by the war in Ukraine. The Israel-Hamas war could escalate into a broader crisis in the Middle East, driving oil prices higher and tipping the global economy into recession. It’s too early to say that we have bottomed out in terms of forecast adjustments.