The digital economy in South East Asia will propel to $1 trillion by 2030

South East Asia is on the path to becoming a $1 trillion digital economy by 2030 propelled by a fast-growing base of digital consumers and merchants, acceleration in e-commerce, and food delivery.

The region is estimated to reach $174 billion in gross merchandise value (GMV) by the end of 2021.

SEA’s digital economy is also further expected to reach more than $360 billion by 2025, outgrowing the earlier projection of $300 billion, according to the sixth edition of Google, Temasek, and Bain & Company’s “e-Conomy Southeast Asia (SEA) Report - Roaring 20’s: The SEA Digital Decade”.

"The phenomenal growth we see in Southeast Asia reinforces our view that the region will define the future of global digital ecosystems. Google’s commitment is to shape a digital decade for everyone in Southeast Asia, playing our role in creating equitable and responsible growth for the region to achieve its potential of $1 trillion in GMV by 2030,” said Stephanie Davis, the vice president for Google in South East Asia.

“We’ll continue to build for the future of the internet in this region, ensure equitable growth for all workers and businesses, and provide inclusive and safe access for online communities.”

Rohit Sipahimalani, chief investment strategist and head of South East Asia at Temasek, added: “The pandemic has led to accelerated and enduring digital adoption in Southeast Asia, which has propelled its internet economy to new heights. Temasek looks forward to increasing our investments in the region’s digital champions, using our capital to catalyze solutions and growth that will enable these companies to take maximum advantage of the digital decade.”

What did the study find?

  • SEA is entering its ‘digital decade’ as the internet increasingly becomes an integral part of consumers’ daily lives. The region now has more than 440 million internet users, and importantly, 350m of them, or about 80%, are digital consumers, i.e. internet users who have bought at least one online service.

  • Since the pandemic began, SEA has added 60m new digital consumers, of which 20m joined in the first half of 2021 alone. Catalyzed by the pandemic, existing digital consumers ventured further into online services, and started buying services in four new verticals since the outbreak began.

  • Existing users are also relying more on digital services and spending more across most verticals. This increased adoption of digital services is showing no signs of reversal, as 9 in 10 new users in 2020 continue to use them in 2021.

  • SEA’s small and medium enterprises have turned to digital platforms to survive the pandemic. Digital financial services emerged as critical enablers, with over 90% of digital merchants now accepting payments digitally.

  • In the next five years, 8 in 10 of those merchants anticipate more than half of their supply purchases and sales will come from online sources.

  • E-commerce is expected to propel the SEA internet economy forward in the next decade. In a strong lead-up to 2030, e-commerce GMV could exceed $120 billion by the end of 2021 (a near doubling from 2020) with the potential to reach $234 billion by 2025.

  • The food delivery sector emerged as a bright spot, growing 33% y-o-y to reach $12 billion in GMV. It has now become the most penetrated digital service, with 71% of all internet users ordering meals online at least once.

  • While online travel growth remains muted, it is likely to see a recovery in the medium-to-long term, driven by pent-up demand and vaccination progress. Online media witnessed a healthy 32% growth to $22 billion in 2021.

  • In 2021, Indonesia contributed 40% of the region's total GMV at $70 billion; while the Philippines led with a 93% growth to become a $17 billion digital economy.

  • 1 in 3 digital merchants believes that they would not have survived the pandemic without going online. The research found that 60% use digital tools to enhance operational and back-office productivity, while 90% accept digital payments.

  • Since the pandemic began, digital financial services have seen healthy growth, specifically in the adoption of e-wallets and A2A (account-to-account), fuelled by both merchant adoption and consumer usage.

  • By 2025, digital payments are forecasted to reach over $1.1 trillion in gross transaction value (GTV), up from a forecast of $707 billion in 2021. Digital lending could see a 50% increase in outstanding balance from $26 billion in 2020 to $39 billion in 2021, led by a rebound in lending appetite and growth in usage of buy-now-pay-later services.

  • Deal value came up to $11.5 billion in the first half of the year, surpassing the $11.6 billion for the entire 2020.

  • Increased deal activity and larger valuations that led to bigger funding rounds have spurred the induction of 11 new consumer technology unicorns in 2021, bringing the total number to 23.

  • Healthtech and edtech continue to be nascent sectors to watch. Healthtech is seeing strong investor interest as consumers are increasingly embracing convenience and accessibility. While edtech has shown healthy growth potential, many investors are taking a ‘wait and see' stance, as scalability remains unclear.

  • Indonesia alone, by 2030, could potentially be two times SEA’s GMV today, while Vietnam could grow 11x to become a $220 billion digital economy.