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Developing economies are almost always more attractive as digital growth markets than advanced markets, yet emerging countries are also more vulnerable to economic and political shocks. Despite much early hype, three markets have suddenly become less attractive in 2015 for the consumption of digital goods and services: Russia, Brazil and Venezuela. Hit by various socioeconomic problems, local consumers in these markets are downgrading their purchases of smartphones and online services, while financing for digital start-ups has largely dried up. However, this could be an opportune time for cost-conscious products.
Source: Euromonitor International from International Telecommunications Union (ITU)/national statistics/Eurostat/OECD/UN/International Monetary Fund (IMF),World Economic Outlook (WEO)
Note: All figures are forecast
Up to 2014, Russia was the standout emerging market in Europe for digital products. Local consumers are IT-savvy and place a premium on communications, with upmarket brands such as Apple in particular demand. However, the outbreak of the Ukraine crisis in early 2014, a prolonged and simultaneous collapse in oil prices (to which the hydrocarbon-driven economy is especially vulnerable), and a sudden devaluation of the rouble have taken a heavy toll on the information and communications technology (ICT) market.
Once the shining beacon of emerging market growth, Brazil. With corruption scandals plaguing a stricken government, consumer confidence has plummeted. The country continues to demonstrate strong growth in indicators such as Internet usage and mobile subscriptions, but consumers have slowdown down spending on tablets, smartphones and other telecom devices.
Following several years of stable economic growth, Venezuela has been engulfed by a huge recession. A forecast real GDP contraction of 7.0% in 2015 is set to be one of the world’s heaviest economic declines. The collapse is far reaching and has paralysed numerous government services that have supplied much of the country’s telecom sector. Venezuelans are even struggling to call abroad since local telephone carriers have fallen behind on payments to their international partners. The country’s heavily subsidised broadband Internet programme in rural areas is also on the verge of closure.