<article>Southeast Asia&#8217;s digital economy may cross the $200 billion mark by Gross Merchandise Value (GMV) this year, three years earlier than thought, according to the 2022 e-Conomy report by Google, Temasek, and Bain &amp; Co. The inaugural e-Conomy SEA report, in 2016, had predicted this to happen by 2025.
GMV in the region is on target to grow to $1 trillion by 2030, the report released on Thursday added.</article>

Southeast Asia&#8217;s digital economy may cross the $200 billion mark by Gross Merchandise Value (GMV) this year, three years earlier than thought, according to the 2022 e-Conomy report by Google, Temasek, and Bain &amp; Co. The inaugural e-Conomy SEA report, in 2016, had predicted this to happen by 2025.
GMV in the region is on target to grow to $1 trillion by 2030, the report released on Thursday added.
Moreover, technology investments in Southeast Asia have witnessed strong momentum in 2022 so far, with deal value in the first six months surpassing that of the year-ago period, said the report released on Thursday.
However, the funding landscape presents a dichotomy: early-stage deals are growing, while late-stage deals are dipping.
Southeast Asia — comprising 600 million people across Singapore, Indonesia, the Philippines, Vietnam, Thailand, and Malaysia — continues to be a hotbed for tech investments, even as investors are becoming more cautious in the wake of soaring prices and a weak global economy.
While the total deal volume in technology remained more or less flat at around 1,200 deals, the private funding value rose around 15% to $13.2 billion in H1 2022, from $11.5 billion in H1 2021, the report found. This was mainly driven by larger average ticket sizes of +13% YoY.
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Venture capitalists remain vested in the region with $15 billion in dry powder to sustain deals. &#8220;VCs are likely to re-invest in their own portfolio companies and weather through the funding winter rather than venture into unproven startups,&#8221; the report said.
Early-stage investments have been doing well, while late-stage companies have been facing difficulties in raising funds, largely due to dim IPO prospects.
The recent increase in long-term US treasury rates has made investments in high-growth tech companies less attractive from a financial perspective, leading to a gradual slowdown in the latter half of 2022, akin to VC trends in the US. With this, the IPO prospects is likely to drive to a halt for the next 12 to 18 months.
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<h3>$1 trillion in GMV by 2030</h3>
Southeast Asia’s digital economy is approaching the $200 billion GMV mark in 2022. By 2025, the digital economy of the region is now expected to have a size of $330 billion.
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The SEA digital economy could reach up to $1 trillion in GMV by 2030, &#8220;provided it can pursue this potential in a sustainable way&#8221;, noted the report. &#8220;Digital inclusion of suburban and lower income users in urban areas will be required to unlock the full economic potential and social impact of SEA’s digital economy by the end of the digital decade.&#8221;
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As much as 100 million of the 460 million internet users in the region came online in the past three years.
<h3>Singapore and Indonesia lead</h3>
Singapore and Indonesia remained the primary investment destinations this year while Vietnam and the Philippines are seeing growing interest.
&#8220;Indonesia, Vietnam, and the Philippines are clear hot spots for growth and investments in the years ahead, driven by heightened digital savviness and affluence,&#8221; according to a VC surveyed for the report.
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The digital economy in Singapore is expected to grow 22% to reach $18 billion this year, with the potential to reach some $30 billion in 2025.
A third of this GMV growth will be driven by e-commerce — expected to hit some $11 billion in 2025. Meanwhile, a recovery in online travel is expected to hit $9 billion by 2025.
Singapore is well-placed to play a leading role in the growth of Southeast Asia’s digital economy and ESG adoption, says Stephanie Davis, vice-president of Google Southeast Asia. “Sustainability is the responsibility of all stakeholders and we want to continue forging the right partnerships and introduce meaningful initiatives that contribute to Singapore’s sustainable and inclusive digital future.”
Agreeing, Fock Wai Hoong, deputy head, technology and consumer and Southeast Asia at Temasek says the city-state will continue to play a pivotal role in the next phase of growth in Southeast Asia’s digital decade as a tech hub and regional gateway for funding and talent.
“Singapore’s vibrant ecosystem provides a conducive environment to nurture financial, natural, social and human capital innovations that are crucial in developing a sustainable digital economy,” he explains.
<h3>Sectors to watch</h3>
The five mainstay digital sectors of the Southeast Asian economy are e-commerce, travel, food &amp; transport, online media, and digital financial services. Sectors that recorded nascent growth are healthtech, software-as-a-service (SaaS), web3, and edtech.
E-commerce growth came in the strongest, with estimates putting its GMV for the year at $131 billion. The higher adoption follows a pickup in spending by consumers in both urban and suburban regions.
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The report highlights there is still headroom for growth from consumers living in suburban areas as the adoption of technology for groceries, travel and music-on-demand remains nascent.
The uncertainties brought on by the macroeconomic headwinds along with a possible reduction in disposable income, soaring prices and lower product availability has tapered southeast Asian consumers’ demand for e-commerce purchases.
As such, marketplaces are now shifting their priorities from acquiring new customers to deepening engagement with existing clients to booth frequency to capture value and loyalty. In line with this, merchants are looking to improve profitability by reducing promotions and discounts while monetising value-added services.
Meanwhile, the digital sectors such as food delivery and online media have been facing slowdowns following the pandemic-induced volumes. Food delivery is now tending to head back to trendline growth and is expected to hit 14% in GMV growth, after tripling during the pandemic.
Similarly, GMV growth for paid online media sectors is set to taper to 9%, while music and video growth returns to normality. Digital ads are maintaining momentum while gaming is a pullback in consumption.
Other sectors such as transport and online travel are seeing a strong recovery, with y-o-y growth coming in at 43% and 115% respectively on the back of higher mobility and a resumption in international travel.
Against this backdrop, recovery is expected to be gradual and take years to reach 2019 levels.
The report noted that digital financial services &#8220;has made significant inroads over the years, buoyed by a highly conducive growth environment&#8221;. A standout for this year is the double digit growth seen across the digital financial services subsectors of payments, remittance, lending, investment and insurance due to enduring offline to online behaviour shifts post-pandemic.
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The entry of digibanks, such as ANEXT Bank and Green Link Digital Bank in Singapore, has shaken up the digital financial services landscape in the region.
Meanwhile, established banks and building on their inherent strengths by investing in efforts to fast-track digitalisation. With this, both digibanks and traditional players are fighting to serve unbanked consumers.
“Fundamentals of the digital economy remain solid and there’s substantial headroom for growth in nascent sectors and unpenetrated markets,” the report noted.

SE Asia's digital economy to hit $200b GMV in 2022 — three years earlier than forecast

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