Germany: Internet economy grows despite war in Ukraine

Germany’s digital industry has continued to grow despite Russia’s war in Ukraine, although uncertainty in the industry and among customers remains high, according to a recent report by digital association eco.

the reportpublished Tuesday (10 May) by eco and international consultancy Arthur D, looked at the potential impact of the war in Ukraine on Germany’s internet economy.

Compared to other sectors, the impact on the digital industry has proven to be limited, despite continued inflation as well as sectoral self-restrictions, the report says. The negative effects of sanctions are overcompensated by price increases, the report adds.

“The internet industry is a reliable partner in the crisis”said Oliver Süme, director of eco, at a press briefing on Tuesday, adding that the policy must help reduce uncertainty in the market.

According to eco, it would be desirable to design a fast and reliable transatlantic agreement on data protection or to take measures to strengthen digital sovereignty and energy independence.

Digital policy spokesperson for the Greens in the German Bundestag, Maik Außendorf, told EURACTIV that “we in politics are faced with the challenge of creating the framework conditions to ensure the planned growth, while guaranteeing German SMEs a high level of IT security”.

Growth forecasts

In the report, analysts forecast steady growth for the internet economy through 2025, with healthy average annual growth of 12.2%. This would result in an increase in turnover of 258 billion euros.

However, as demand could stagnate in some areas or the crisis could cause consumers to reduce non-essential spending, a medium-term correction phase is expected from 2023, according to the report.

The report also states that the shift to working from home during the pandemic has already led to a surge in sales in the internet economy, as a significant increase in demand for services has been felt in many areas.

Ongoing inflation and the war in Ukraine are now driving price increases and thus prolonging the trend of revenue growth, at least in the short term. But eco pointed out that interest rates, energy and production costs are also rising in some cases, meaning that increased sales should not translate into greater profitability.

A previous report from digital association Bitkom painted a bleaker picture of the future of the digital industry in Germany, where assessments of the situation and business expectations had deteriorated following the Russian invasion.

It is “small consolation that the business environment in the digital industry continues to be much better than in the economy in general”said Achim Berg, president of Bitkom, in a press release.

A fashionable digital sector

This context of crisis “don’t leave our industry unscathed”said Mr. Süme of eco. “Nevertheless, we continue to see growth trends in all areas, which shows that digitalization is not a short-term trend, but that we must continue to invest in the sustainable digital transition of the economy and of the society “said Mr. Süme.

Mr. Außendorf, a member of the Green party, also stressed that the internet economy is a powerful engine for the German economy, even in times of crisis.

However, according to Mr Außendorf, in addition to the conversion of the energy supply, it was also necessary to “radically challenge the previous IT security policy and implement various (immediate) measures to increase IT security as quickly as possible. »

According to the report, the industry with the highest growth rate is “services and apps”especially as cybersecurity services are expected to be in high demand in the near future.

The increase in war-related attacks leads to “an increased willingness to spend more on cybersecurity products”. It is also a great opportunity for local solution providers.

Although a massive cyberwar against German companies is unlikely, the uncertainty and risk “remain high and should be anticipated in the future through more secure and robust IT systems and infrastructure”says the report.

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Germany: Internet economy grows despite war in Ukraine

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