Internet Economy: Here’s How Much Digital Trade Affects Economies [MAP]

  on

Countries in which the general population does not have easy access to the Internet, whether it’s because of government policies or infrastructure issues, are losing out on average 2.5 percent GDP growth a year, according to a new study by the Boston Consulting Group titled “Greasing the Wheels of the Internet Economy.”

The Internet economy contributes between 5 percent to 9 percent of total GDP in developed markets where constraints on Internet are minimal -- the U.S., Sweden, Hong Kong, etc. In developing economies, the Internet economy is growing even faster, at the rate of 15 percent to 25 percent each year.

According to the study, as the digital economy has matured, “sources of friction have taken hold, constraining free exchange and slowing growth.”

“Companies find, for example, that they don’t have the necessary information- and communications-technology skills to take full advantage of their e-commerce potential. Small businesses looking to expand online are confronted with data security issues that were not problems in the offline world.”

The study measured the constraints on Internet use in 65 countries, basing their calculations like “Internet bandwidth per capita” and “average mobile connection speed,” “strength of intellectual property protection” and “press freedom” and ranked and scored each one on the e-Friction Index.

The U.S. ranked 6th from the top on the index. Sweden, Finland, Denmark, Switzerland and Hong Kong took the top five spots in the ranking.

At the bottom of the ranking, where constraints to Internet use were high, were Nigeria, Pakistan, Egypt, Bangladesh and Vietnam.

Here’s a map of the 65 countries analyzed in the index. Click on any country for more info:

Here’s a chart from the Boston Consulting Group that breaks down how much of the “e-friction” in each country is caused by issues relating to infrastructure and industry, individual constraints and constraints on the dissemination of information:

Greasing_Wheels_Ex2_lg_tcm80-152848 The BCG e-Friction Index

Join the Discussion