We expect the Indonesian IT market will be a regional outperformer over the medium term, on the back of strong economic growth, a low PC penetration rate and an emerging middle class. Retail hardware, enterprise software and cloud computing are expected to be key drivers of medium-term growth. The retail market will be the major driver of growth, with PC penetration estimated at below 10% in 2012, meaning there is significant growth potential from first-time buyers and upgrades/personal devices. However, vendors face short-term challenges in the form of a depreciation of the rupiah, which has raised the cost of dollar denominated hardware and software imports. In the immediate future, IT spending is forecast to increase to IDR69.7trn in 2014, up 12.3% from 2013, with the IT market accounting for 0.67% of GDP.