The term “digital economy” represents the merger between digital computing and the traditional economy, how traditional economic activities (production, distribution, trade) are being changed by the Internet. The digital economy is known as the internet economy (Web Economy) or the new economy because the digital economy is constantly replacing and expanding the traditional economy. We all witness the contribution of the digital economy to the various companies, but it turns out that the contribution to the countries is no less than that. It has been proven that the more digital a country’s economy becomes, the higher the economic growth and the welfare of the residents. And good examples of this are Taiwan and Israel that this transition made them from “developing” to “rich” and this despite countless economic and political problems.
The digital economy index of the Financial Times and the important British consulting company Omedia, theFT-Omdia Digital Economies Index, measures the size and growth of the world’s leading digital economies from 2022 to 2026. The index analyzes 16 digital economy indicators across five main market segments in 51 countries (every year more countries are added to the index which last year tested 39). The five countries that led in 2022 in the rate of expansion of the digital economy were India and Vietnam where the new economy expanded at a rate of 12.3%, Israel that grew at 11.6% and Indonesia and China that grew at a rate of 11.4% and 11.25% respectively.
In 2023, India and Mexico will lead with 10%, followed by Vietnam, Israel and Colombia with 10.3, 10.2 and 9.6 percent respectively. In 2026, the top 5 will be Vietnam, Mexico, India, Indonesia and Saudi Arabia. Israel will drop in growth rate to eighth place. Taiwan by the way is in 29th place and in 2026 it is predicted to drop to 35th place.
However, one should of course remember that in terms of the scope of digital activity, the developed countries are by far the leaders. The top five, in terms of the dollar volume of digital activity in 2022, are China, the USA, India, Japan and Germany and those countries, in the same order, will also lead in 2026. Israel, according to this criterion, is in 41st place and is predicted to remain in the same place Also in 2026. Taiwan, which is now in 22nd place, will rise to 20th place. You will find all the statistics and tables in the article.
The rapid increase in the penetration of the digital economy indicates that more and more countries realize that the transition to a digital economy is not only for the purpose of raising the standard of living and creating wealth, but also in order to get through economic crises better (as it turned out with Corona) and at Omedia believe that the global expansion rate of the digital economy is within the foreseeable range will be faster than the growth rate of most economic sectors. This optimism is based on the rapid improvement in connectivity (Connectivity) and the example of this is the financial industry. “The expanding phenomenon of digital banking providers and ‘buy now, pay later’ options,” Omedia claims, “challenges, with the help of advertisers who invest huge sums in conveying the message to internet and wireless users, the dominance of the banks and the major card networks.”
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Omedia and the Financial Times identified another interesting point, that more and more politicians, from the government level down and all over the world believe that much larger budgets must be approved for the establishment of open centers and technological production, “It has really become a cliché among politicians. Everyone wants to promote ‘Silicon Valley’ in their city, in the district that they represent and in their country,” the study claims, “this despite the fact that the world is full of failures of attempts to imitate the magic mixture of entrepreneurial dynamism, financial adventurism, coordinated universities and a supportive government that was created in Silicon Valley and even though it is not at all certain that this is the model for the continued adoption of digitalization (especially in light of the picture that emerges from the industry The technology in the last two years and especially the ‘crypto fiasco'”.
They cite Britain as an example. There, very recently, the finance minister of the new government, Jeremy Hunt, stated that he would make an effort to make Britain “the new Silicon Valley”, a statement that, according to Omedia experts, does not correspond to the reality in Britain at the moment. The education system, for example, will not be up to the task because there is a serious lack of study options in the field of computer science.
Britain is also declining as a “preferred place of immigration” for hit-makers. In the previous decade, Great Britain was in second place after the USA, but today it is in seventh place among the technology giants after the USA, Canada, Australia, France, Germany and yes, Saudi Arabia. “And when it comes to the rate of R&D growth that British governments have been talking about for years about supporting R&D, this simply does not happen and they compare the activities of French President Macron to the heads of the British governments. Macron succeeded in making France (including the Paris Stock Exchange) the country of choice for hi-tech businesses. Finally, it is noted Israel and South Korea as leaders in R&D investments.
How to invest in the growth of the digital economy?
The digital economy—the application of Internet-based digital technologies to the production and trade of goods and services—is becoming an increasingly important part of the global economy. The transition to a digital economy can provide a boost to competitiveness in all sectors and will not be affected by an economic slowdown, new opportunities for business and entrepreneurial activity will only increase and new avenues for investment will continue to be created. For years I have been telling readers that the technology revolution, since the beginning of its actual merger with the “old economy” during the 2008 crisis, will completely change the global economy and society, mostly for the better and will create a flood of opportunities that will return for investors “phenomena” such as AMZN, TSLA, EW, ISRG,TMO (The last three, as old readers know, started with us in the corner of dreams).
The information revolution is the pillar of fire that leads the process and this revolution is at the very beginning, just think about what products and processes will reach the market on the way to an autonomous car or in the great transition to preventive medicine. Yes, there will be corrections on the way, even bigger than the current one, but the direction is clear and progress cannot be stopped.
The current correction of values in the technological field creates an opportunity for long-term investors and not only at the micro level but also at the macro level. Those who come to the conclusion, like us, that the digital economy does have a positive effect on growth and efficiency must dedicate a corner to the subject in their investment portfolio, not only a corner for stocks (mainly baskets) in the field but also for investing in baskets of countries. There is no doubt that the intensification of the Chinese economy as an example, especially between 2004 and 2021, is the result of the technology revolution and led by digitalization and especially in per capita income and GDP (see data).
The dramatic decrease in the rate of increases in 2022 and probably also in 2023 are the result of a decrease in digitization activity following the conflict with the US and the war on Corona. The research by Omedia and the Financial Times signals that it is worth investing in representative baskets of India (WHEREVER as an example that endures throughout the amendment), Vietnam (VNM As an example, it will drop by 50% from the end of 2021 level (and to consider an investment in Mexico)EWW As an example that doubled throughout the correction because large American entities are coming in strongly).
As for investment at the micro level: The Corona epidemic has dramatically accelerated the rate of evolution and adoption of technological progress in the field ofIT in the last two years. As of the end of 2022, the global digital population has grown to five billion people (over 60% of the world’s population). Those 5 billion who already benefit from digitalization do not “benefit” equally, so the demand for the latest technologies and the emerging technological trends is still in its infancy and it is mainly about 9 leading technological fields that, in our opinion, the investor should follow, understand and try to choose the investments from which he will make the most and the current timing (along 2023) is appropriate in our opinion.
The fields are: artificial intelligence (AI), machine learning (ML), IOTcyber security, quantum computing (using the laws of quantum mechanics to solve problems), robotics (automation of processes), virtual reality (VR) and layered (AR) that provide an upgraded experience that combines virtual and reality with improved 3D images, an indispensable part for the fields of gaming, e-commerce, marketing, education and practically every economic field. and – edge computing (Edge computinga distributed computing system that brings together enterprise applications and data sources such as devices IoT to each other).
Additional areas – the generation of wireless communication G5 and finally the blockchain technologies that were created to bless and were perceived as curses (because of Bitcoin). When it comes to the micro level, we believe that the investment should be made Only through baskets and as far as he knows there are still no baskets that are defined as technology baskets that promote a digital economy. Therefore, a solid investor should concentrate on technology baskets and large chips, XLK and-SOXX as an example. True, there are baskets focused on the technologies we mentioned, but the progress will be led mainly by the technology giants and semiconductors, and the two baskets we mentioned underwent a nice correction in the last year.
The bolder ones have a variety of baskets that focus on the technologies we mentioned, most of which have passed and will probably continue to pass, a nice value correction like KNOB which follows the “New Economy Index” which includes over 550 companies from all over the world (including Israeli ones), companies whose products and services drive innovation and change the global economy through the use of existing and developing technologies such as robotics, automation, artificial intelligence, connectivity, and the like. The basket currently manages 1.7 billion. There are quite a few baskets like it.
* The above should not be seen as a recommendation to carry out actions and/or investment advice and/or investment marketing. The information presented is for information only and is not a substitute for advice. The one who makes use of the above information – does so at his own discretion and sole responsibility. The reporter may hold some of the papers mentioned above.