Emerging markets in the crosshairs: Why cybersecurity is an economic imperative?

In today’s interconnected era, the stakes for cybersecurity have never been higher. By 2024, over 5.4 billion people - 67% of the global population - will rely on the internet, and there will be an estimated 18 billion connected devices worldwide.

In a world increasingly dependent on digital technologies, cybersecurity has emerged as more than a technical challenge - it is a fundamental economic necessity. As nations embrace digital transformation to boost productivity, improve governance, and foster growth, the lurking risks of cyberattacks threaten to undermine progress. This duality forms the crux of Cybersecurity Economics for Emerging Markets, a pivotal report authored by Estefania Vergara Cobos under the World Bank’s Digital Transformation Global Department. This groundbreaking analysis dissects the multifaceted relationship between cybersecurity and economic resilience, focusing on developing nations navigating the complexities of rapid digitalization.

In today’s interconnected era, the stakes for cybersecurity have never been higher. By 2024, over 5.4 billion people - 67% of the global population - will rely on the internet, and there will be an estimated 18 billion connected devices worldwide. However, as the report elucidates, this unprecedented connectivity comes with escalating vulnerabilities. Cyberattacks are no longer isolated events targeting specific sectors; they are pervasive threats capable of destabilizing entire economies, as demonstrated by recent high-profile incidents in Costa Rica, Albania, and Ukraine. The report’s findings compel us to rethink how emerging markets should balance the promise of digitalization with the perils of an expanding cyberattack surface.

A wake-up call for emerging economies

The global digital economy’s rapid expansion has coincided with a dramatic surge in cyber incidents. Between 2014 and 2023, publicly disclosed cyberattacks grew by 21% annually, a trend fueled by geopolitical conflicts like the Russia-Ukraine war and the increased adoption of digital services during the COVID-19 pandemic. Developing countries, despite accounting for 30% of global cyber incidents, are disproportionately vulnerable due to weaker cybersecurity frameworks and underfunded defenses.

The Costa Rican ransomware attack of 2022 is emblematic of the systemic threats facing emerging economies. Affecting 26 government agencies, this incident forced the country to declare a state of national emergency, disrupted essential services, and inflicted economic losses equivalent to 2.4% of its GDP. Such events highlight the dual challenge for developing nations: accelerating digital adoption while mitigating the associated cyber risks.

Latin America and the Caribbean (LAC) exemplify the rapid growth of cyber incidents in developing regions. From 2014 to 2023, the region experienced a 25% annual increase in reported attacks, driven by a 280% rise in e-commerce, the proliferation of Internet of Things (IoT) devices, and the expansion of e-government services. These trends, coupled with limited cybersecurity awareness and investment, create a precarious situation for nations striving to harness the benefits of digital transformation.

The economic toll of cyber incidents

Cyberattacks impose significant economic costs, particularly in nations with constrained resources. The report estimates that reducing the frequency of major cyber incidents could increase GDP per capita by 1.5% in developing countries. Beyond direct financial losses, cyberattacks disrupt critical infrastructure, erode trust in digital systems, and hinder social development.

The COVID-19 pandemic exacerbated these challenges, with disclosed cyber incidents rising by 62% globally between 2019 and 2020. The transition to remote work, e-learning, and e-commerce exposed vulnerabilities in public administration, healthcare, and education sectors. Meanwhile, the Russia-Ukraine war demonstrated how cyberattacks are weaponized in modern conflicts, targeting critical sectors like utilities and communications.

Emerging markets are particularly susceptible to the cascading effects of cyber incidents. For example, small and medium enterprises (SMEs) often lack the resources to recover from data breaches, leaving them disproportionately affected. Moreover, systemic attacks—like the 2017 NotPetya ransomware attack, which caused $7.3 billion in global losses—highlight the interconnected nature of cyber risks and their potential to disrupt entire supply chains.

A fragmented cybersecurity market: Challenges and inequities

The global cybersecurity market, projected to reach $270 billion by 2026, is expanding rapidly, yet it remains marked by inefficiencies and inequities. High-income countries dominate the market, accounting for over 50% of global demand, while developing nations face significant barriers to accessing affordable and effective cybersecurity solutions.

Market inefficiencies highlighted in the report include:

• Third-Party Risk: Many cyber incidents originate from vulnerabilities in third-party systems, yet organizations often underinvest in extended risk management.
• Unclear ROI: Quantifying the financial benefits of cybersecurity investments remains challenging, deterring optimal resource allocation.
• Moral Hazard: Organizations frequently pass the costs of cyber incidents onto consumers, reducing the incentive to invest in prevention.
• Workforce Shortages: A global shortfall of over 4 million cybersecurity professionals disproportionately affects SMEs and government agencies in developing countries.

In response, governments in emerging markets must take proactive measures to bridge these gaps. Strengthening public-private partnerships, incentivizing local cybersecurity industries, and fostering international cooperation are critical steps toward building resilience.

Policy recommendations: A roadmap for resilient digital economies

The report emphasizes that cybersecurity is a shared responsibility, requiring coordinated efforts across governments, businesses, and civil society. Key recommendations include:

• Enhancing Data Collection: Establishing standardized mechanisms for reporting cyber incidents to inform evidence-based policymaking.
• Building Local Capacity: Developing national cybersecurity industries and training programs tailored to local contexts.
• Prioritizing Critical Sectors: Focusing on healthcare, finance, and public administration, which are disproportionately targeted.
• Strengthening International Collaboration: Leveraging global partnerships to address transnational cyber threats and share best practices.
• Supporting SMEs: Providing affordable cybersecurity solutions and training to small businesses, which form the backbone of many economies.

Securing the digital future

As the digital era unfolds, the economic stakes of cybersecurity are clearer than ever. For emerging markets, investing in cybersecurity is not just a technical imperative - it is a cornerstone of sustainable development and economic resilience. These insights serve as a vital guide for policymakers, business leaders, and researchers striving to navigate this complex landscape. By addressing the vulnerabilities and inequities in the global cybersecurity ecosystem, we can build a safer, more inclusive digital future.