Internet economy in Saudi Arabia forecast to reach SAR 107 billion by 2016

By Isla MacFarlane

The Saudi internet economy contributed SAR 37 billion to the overall Saudi economy in 2010, representing 2.2 per cent of GDP, and putting Saudi Arabia at 13th place amongst the G-20 countries.

This figure is projected to rise to SAR 107 billion by 2016, representing 3.8 per cent of GDP, according to a new report in The Boston Consulting Group’s Connected World series. It found that by 2016 the total size of the G-20 Internet economy will be $4.2 trillion, equivalent to 5.3 per cent of GDP, up from $2.3 trillion or 4.1 per cent in 2010.

The $4.2 Trillion Opportunity: The Internet Economy in the G-20’finds that if the Internet were a sector in Saudi Arabia, it would be more than twice as large as the utilities sector.

Saudi Arabia’s Internet economy growth rate of 19.5 per cent compares favourably to other developing nations in the G-20, which are growing at an average of 17.8 per cent. Projected growth rates elsewhere are: 24.3 per cent in Argentina, 18.3 per cent in Russia and 15.6 per cent in Mexico. In 2016, Saudi Arabia will rank number 10 in the G-20, with its contribution to GDP increasing to 3.8 per cent.

These growth rates are impressive compared to the Internet economies of developed G-20 markets, which are expected to grow at an average of 8.1 per cent through 2016 – for example, 10.9 per cent for the U.K. and 7.8 per cent for Germany. In 2010 developed markets contributed 76 per cent of the G-20’s Internet economy; by 2016 that will fall to 66 per cent.

“The Internet offers one of the world’s unfettered growth stories,” said Joerg Hildebrandt, Partner and Managing Director at BCG Middle East. “A robust Internet economy is an essential underpinning for Saudi Arabia’s future, providing both economic and social benefits.”

The $4.2 Trillion Opportunity builds on three years of research conducted by BCG andis the most comprehensive report published on the impact of the Internet globally. This study is the first to examine the Internet’s economic impact across so much of the world’s economy – 90 percent of global GDP – and highlights how this increases as mobile devices and social networks become more prevalent.

In 2010, the share of total retail carried out online in Saudi Arabia was 2.9 percentor $3 billion and is projected to reach eight percentor $15 billion by 2016. Hildebrandt said, “This represents a dramatic increase and to put it into perspective, it would place Saudi Arabia at fifthposition amongst the G-20 countries, following only UK, Germany, Australia and South Korea.”

What’s more, in 2010, the Internet influenced an additional 4.7 per cent of total retail from connected consumers researching online and purchasing offline (‘ROPO’) in Saudi Arabia. These numbers compare to four per cent for Brazil, 4.8 per cent for Russia, and 9.6 per cent for the US.

Consumers are the big winners of the Internet economy and BCG’s study highlights just how essential it has become to everyday life and the value which consumers attach to it. Asked how much they would have to be paid to live without Internet access, respondents across the G-20 said an average of $1,430 per year, or 4.6 times what they pay for access and services.

The report highlights the extent to which the Internet is driving growth in businesses across the G-20. Drawn from the most comprehensive survey of its kind of SMEs around the world, the BCG report finds that “high-web” companies – ones that embrace the Internet for marketing, sales and interactions with customers and suppliers – have grown revenues up to 22 per cent points faster over the past three years compared to those who made low or no use of the Internet.

“Around the world SMEs which embrace the Internet are growing faster and adding more jobs than those that don’t. By encouraging businesses to adopt the Internet, countries can improve their competitiveness and growth prospects,” said Hildebrandt.

The value of the Internet economy was estimated using the expenditure approach to GDP measurement. This approach measures total spending on finished goods and services. It covers four key elements: consumption (both goods sold online and the costs of getting online), investment, government spending, and net exports. BCG used the loss aversion approach to measure the value of the Internet to consumers, in a survey of 9, 7 10 Internet users in 13 countries.

Published by CPI Financial:
Boston Consulting Group: The Internet Economy in the G-20 :



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Filed under Consumer, eCommerce, Luxury Middle East

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