To The Highest! Digital Economy in Southeast Asia Will Reach $200 Billion in 2022
According to a recent research by Google, Temasek, and Bain & Company, the top digital economies in South East Asia developed faster than anticipated in 2022 and are on track to hit $200 billion in transaction value this year.
The achievement represents a 20% increase from last year's $161 billion in gross merchandise value and comes three years ahead of earlier expectations (GMV). In a previous analysis from 2016, it was predicted that by 2025, the six largest countries in the region's internet economy will have a GMV of around $200 billion.
The analysis covers the economy of Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam, which total six significant economies. The populations of East Timor and Papua New Guinea, as well as Cambodia, Laos, and Myanmar, were not discussed in the report.
In 2022, 20 million more people will have access to the internet in Southeast Asia, bringing the total number of users to 460 million.
That growth, which was barely 4% in 2022 as compared to the previous year, is beginning to slow down. In contrast, at the height of the coronavirus pandemic in 2021 and 2020, there were yearly increases of 10% and 11%, respectively.
Despite the region's return to offline shopping following the lifting of pandemic lockdowns, e-commerce remains the region's main driver of growth. The industry's GMV increased by 16% to $131 billion in 2022.
Due to changes in offline-to-online behavior following the pandemic, digital financial services—which include payments, remittances, lending, investments, and insurance—saw significant growth from 2021 to 2022.
Among these services, insurance saw the most growth, increasing 31% year over year, while lending increased 25%.
“As we have opened back up post-pandemic, mobility in retail places has actually surpassed pre-pandemic [levels] in multiple countries. Yet, the digital economy still grew by 20% year-on-year. And that signifies that a lot of the adoption that took place during the pandemic is here to stay. Some new habits have been formed,” Stephanie Davis, vice president at Google Southeast Asia, said on CNBC’s “Street Signs Asia.”
As online purchasing grows commonplace, Southeast Asia's online economy is still on track to surpass $1 trillion by 2030, according to the report.
If businesses focus more on profitability during the next three years, the internet economy in the six countries would reportedly reach $330 billion by 2025. Some of the most successful unicorn companies in Southeast Asia, like Grab and Sea Limited, have yet to turn a profit, collecting billions of losses in 2021.
"Investors will be cautious in the short-term as most do not expect a return to 2021 deal activity and valuation peaks in the next couple of years," quoted from the e-Conomy SEA 2022 report.
From 2022 to 2025, GMV is anticipated to expand by double digits in each of the six nations. According to the analysis, Vietnam will take the lead with a 31% increase in GMV from $23 billion in 2022 to $49 billion in 2025. With a projected GMV increase of 20%, from $20 billion in 2022 to $35 billion in 2025, the Philippines follows closely behind.