Forecasting ICT-Driven Trade Competitiveness 2024-2028: A Cluster and Scenario Analysis

TL;DR

This paper develops the Digital Competitiveness Index for Trade (DCIT) to evaluate countries' digital trade readiness, demonstrating its robustness, predictive power, and the benefits of combined ICT and FDI strategies for enhancing trade competitiveness from 2024 to 2028.

Contribution

It introduces the DCIT index, integrating multiple indicators to assess digital trade competitiveness and provides scenario analysis for strategic digital investment planning.

Findings

DCIT is a robust measure with 26% sensitivity to weights.

DCIT explains 67% of trade connectivity growth.

Combined ICT and FDI strategies yield up to 10% higher gains.

Abstract

This study introduces the Digital Competitiveness Index for Trade (DCIT), a composite metric integrating ICT readiness, broadband adoption, GDP per capita, foreign direct investment, government effectiveness, and trade volume to assess countries' digital trade competitiveness. The index captures the enabling conditions -- ICT innovation capacity, broadband diffusion, investment intensity, and macroeconomic fundamentals - that shape a nation's ability to participate in digital trade. Sensitivity analysis demonstrates strong robustness: adjusting ICT-FDI weights alters DCIT outcomes by only 26%, with near perfect linearity (R^2 = 0.9996). Predictive validation shows that DCIT is a strong explainer of trade connectivity growth (R^2 = 0.67) but a modest predictor of GDP expansion. Scenario simulations reveal that combined ICT and FDI acceleration consistently outperforms single-lever strategies, with gains increasing by cluster maturity (up to 10% in advanced clusters). High-growth scenarios generate a 50-60% uplift in competitiveness for mid-tier and advanced clusters, underscoring the importance of integrated digital investment strategies.