Southeast Asia’s digital economy is set to grow to about US$300 billion in gross merchandise value (GMV) this year, well past forecasts from almost a decade ago, according to a report by Google, Temasek and Bain & Company today.
More people, including 200 million new Internet users, have been shopping online, ordering food delivery, using ride hailing apps, booking travel online and consuming media and games in the past decade, thus driving up the market size by about 15 per cent, year on year.
The numbers released today will fuel optimism in one of the world’s fastest growing regions, as it has managed to expand despite pandemic uncertainties and maturing markets in recent years.
In 2025, Singapore, Vietnam, Malaysia, Thailand, Indonesia and the Philippines are expected to grow their GMV to US$299 billion, according to the report published annually since 2016. This year, it has included four new countries – Brunei, Cambodia, Laos and Myanmar – that will push the GMV number to US$305 billion.
E-commerce remains the largest contributor of GMV, followed by travel, then transport and food and finally, online media, according to the e-Conomy SEA report.
It refers to GMV as the total value of the goods and services sold, which online platforms only take a cut of. When it comes to revenues, the region is expected to generate as much as US$135 billion this year, as digital service providers such as ride hailing providers turn profitable.
Florian Hoppe, partner at Bain & Company, the research firm, said Southeast Asia has been fast to adopt some of the latest digital innovations.
Video commerce, where influencers or celebrities actively peddle merchandise on a livestream, now accounts for 25 per cent of total GMV for e-commerce, he told reporters this morning.
Other sectors, such as transport and food delivery, are maturing, with operators now making money instead of burning investor money for market share.
Fock Wai Hoong, head of Southeast Asia for Singapore’s state-owned investment firm, Temasek, said the region will continue to experience growth in digital services as funding has remained stable for such players in the region.
There has been a bit more investor focus on later-stage startups of late, though across the board, there remain good funding opportunities to scale up digital businesses, he added.
And, of course, AI is expected to play a role in pushing more spending in the digital economy in the years ahead, according to the companies behind the report.
Hoppe said that AI is already an important part of a buying journey today because people find out about a product through a search, which then informs them with an AI summary.
Asked about a potential AI bubble that could burst in future, he said various technologies would go through hype cycles but eventually AI would be a big part of the digital economy in a decade’s time.
Replying to the same question, Google’s vice-president for Southeast Asia and South Asia Frontier, Sapna Chadha, said AI is not just hype because it has become essential to users today in how they look up information.
When it becomes so useful to people, there will be opportunities for businesses to create products and services that appeal to them in future, she added.
