Southeast Asia’s booming internet economy is set to double to $363 billion by 2025, eclipsing the previous forecast of $300 billion, research from Google, Temasek Holdings Pte and Bain & Co shows.
E-commerce, travel, media, transport and food are driving the region’s digital growth, with online spending rising 49% in 2021 to $174 billion, the companies said in their latest annual report. The region added 60 million new digital consumers since the start of the pandemic, led by Thailand and the Philippines.
Southeast Asia, home to Alibaba Group Holding Ltd’s Lazada and Tencent Holdings Ltd-backed Sea Ltd, will see a 62% increase in e-commerce gross merchandise value (GMV) this year as home-bound consumers pick up groceries and essentials from the likes of Lazada’s RedMart and Sea’s Shopee. Online shopping is now forecast to hit $234 billion in 2025 versus a previous $172 billion estimate, making up 64% of the region’s total estimated digital GMV of $363 billion, the research shows.
“We continue to see users come online at a blistering pace,” Stephanie Davis, vice president at Google Southeast Asia, said in an interview with Bloomberg TV’s Haslinda Amin and Rishaad Salamat. “Digital consumerism has really taken hold since the pandemic. We’re seeing a digital decade ahead of us in Southeast Asia and a possibility of $1 trillion economy in the digital space by 2030.”
Deals for internet companies in Southeast Asia totalled $11.5 billion in the first half of this year, putting the region on track to surpass the $11.6 billion investment in all of 2020. Some of the region’s most valuable tech start-ups including Grab Holdings Inc and GoTo are preparing to go public to raise capital or allow early investors to monetise their holdings.
“2021 has been a record for investments in Southeast Asian net economy,” Rohit Sipahimalani, chief investment strategist and head of Southeast Asia at Temasek, said during a virtual press conference. “The world is awash with liquidity and looking for investment opportunities in low interest-rate environment, but it’s also because people have seen the resilience of the sector to Covid.”
Indonesia is the region’s largest digital economy where online spending will probably double to $146 billion by 2025. Venture capital deals in the country in the first half of 2021 surpassed the full-year totals of each of the past four years, the report showed. Vietnam is expected to grow at the fastest rate among the six countries tracked by the study, nearly tripling in online GMV over the next four years.
Each of the markets has big growth potential over the next decade, with Indonesia alone possibly becoming twice as big a market by 2030 as the entire Southeast Asia is currently, said Florian Hoppe, head of digital practice in Asia Pacific at Bain.