Southeast Asia's digital economy is ballooning to hit $200billion this year

Key Points

the digital economy is defined as a broad range of economic activities that use digitized information and knowledge as key factors of production
Online spending in the region will rise about 20% this year to $200 billion
the number of internet users in Southeast Asia has increased to 460 million
E-commerce, and financial services, among others covered in the report named as the leading sectors driving the region’s digital growth

“Just as Southeast Asia’s economies reopened from pandemic lockdowns, macroeconomic headwinds started to blow. Southeast Asia’s consumers and the digital economy are increasingly feeling the impact,”

Southeast Asia’s selected digital economies are undergoing a breakneck speed, driven by the popularity of online platforms and services after the pandemic hit hard during the past few years. That being said, the digital wave is transforming the region which is slated to hit a whopping $200 billion in the total value of transactions this year, jointly researched by Google, Temasek, and Bain & Company found.

Its recently published report titled “e-Conomy SEA 2022” covers the most digitally connected economies namely: Indonesia, Malaysia, Singapore, Thailand, the Philippines, and Vietnam. The report did not address the populations of Brunei, Cambodia, Laos, and Myanmar, as well as East Timor and Papua New Guinea.

Asian Development Bank defines the digital economy as a broad range of economic activities that use digitized information and knowledge as key factors of production. The internet, cloud computing, big data, fintech, and other new digital technologies are used to collect, store, analyze, and share information digitally and transform social interactions. The digitization of the economy, according to ADB, creates benefits and efficiencies as digital technologies drive innovation and fuel job opportunities and economic growth.

Despite macroeconomic headwinds, the e-Conomy SEA 2022 report has claimed that Southeast Asia’s digital economy remains on course to reach $200 billion in gross merchandise value (GMV) in 2022. The milestone comes three years ahead of earlier projections and is a 20% increase from last year’s $161 billion in GMV. Its earlier report in 2016 estimated that the internet economy in the region’s six major countries will close in on $200 billion in GMV by 2025.

The number of internet users in Southeast Asia continues to expand at a remarkable pace – with 20 million new users added in 2022, bringing the total number of users to 460 million.

E-commerce, financial services, online travel, transport & food, and online media covered in the report as the leading sectors driving the region’s digital growth, yet there are four sectors that remain at a nascent stage including healthtech, Web3, Edtech, and Saas, which the last one is a software distribution model in which a cloud provider hosts applications and makes them available to end users over the internet.

Nascent sectors like healthtech, SaaS, and Web3 hold the promise of addressing some of SEA’s key challenges. But as they gather adoption momentum, they’re facing persistent challenges in terms of monetization, the report emphasized.

“After years of acceleration, digital adoption growth is normalizing,” said the report. As online shopping becomes the norm, Southeast Asia’s internet economy is projected to be worth $330 billion by 2025 and the figure is anticipated to potentially reach between $600 billion to $1 trillion by 2030, respectively.

Investments in tech companies gained momentum during the first half of 2022, but investors are becoming more prudent. However, they are optimistic about investing in the region with $15 billion dry powder to sustainable deals.