The Impact of the Digital Economy on Economic Activity

Abstract

This study aimed to review the level of the digital economy in Arab countries, analyze the trends of indicators related to the digital economy, and estimate its impact on real Gross Domestic Product (GDP) in Arab countries from 2012 to 2022. The analysis was based on Panel Data. Two models were constructed in this study. In the first model, a Composite Benchmark Index was developed, which aggregated a set of individual indicators measuring performance across various domains in the digital economy. The impact of this index on economic activity in Arab countries was estimated. The second model relied on the Arab Digital Economy Index issued by the Arab Union for Digital Economy to measure the impact of the digital economy on economic activity in Arab countries. The results showed a positive and significant relationship between the Gross Domestic Product (GDP) and the Composite Benchmark Index of the digital economy. An increase of one percentage point in the composite digital economy index led to a growth of 0.41 percentage points in GDP. also showed that a one percentage point increase in the Arab Digital Economy Index led to an economic growth increase of 0.12 percentage points.