Google, Temasek, and Bain & Company released the sixth edition of the e-Conomy Southeast Asia (SEA) Report - Roaring 20’s: The SEA Digital Decade.
The report provides a ten-year outlook for the first time, highlighting how the region is on the path to become 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, growth in Southeast Asia, led by the Philippines, is estimated to reach $174 billion in gross merchandise value (GMV) by the end of 2021.
The region’s digital economy is further expected to reach $360 billion by 2025, outgrowing the earlier projection of $300 billion.
According to the report, Southeast Asia’s internet economies—Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam—are showing double-digit growth, and the Philippines is leading the way.
From 2020 to 2021, the Philippines recorded the region’s highest growth rate of 93 percent, predicted to grow from $9 billion to $17 billion. It is expected to reach $40 billion by 2025.
“The digital adoption we’ve seen in the Philippines since last year has contributed to the accelerated growth of the country’s internet economy, magnifying its vast potential," said Bernadette Nacario, country director of Google Philippines.
"The findings of the e-Conomy Southeast Asia Report are encouraging, especially with the Philippines as the fastest-growing digital economy now in the region.”
The Philippines has one of the region’s highest proportions of new users who started consuming more content online during the pandemic, with 20 percent of the country’s digital consumers using a digital service for the first time since March 2020.
“The pandemic has led to enduring digital adoption in Southeast Asia, which has propelled its internet economy to new heights,” said Rohit Sipahimalani, chief
investment strategist and head of Temasek in South East Asia.
The Philippines is entering its digital decade as the internet increasingly becomes an integral part of the consumers’ daily lives. The growth of the digital market in the country was driven by the explosive 132 percent growth in e-commerce and double-digit growth across all sectors including food delivery services.
“The Philippines’ internet economy is the fastest growing in SEA as a result of strict COVID-19 restrictions and a large number of new digital consumers,” said Willy Chang, Associate Partner at Bain & Company.
Below are key insights on the Philippines' growth in the internet economy.
Consumers Adopt a New Way of Spending
The Philippines has seen 12 million new digital consumers since the start of the pandemic up to the first half of 2021, of which 63 percent are from non-metro areas. Ninety-nine percent say that they intend to continue using these services going forward.
Pre-pandemic users—those who used the services before the pandemic—have consumed an average of 4.3 more services since the pandemic began and 95 percent of pandemic consumers are still consumers today.
Despite rapid growth in the last 18 months, there remains significant headroom since the Philippines has the lowest digital consumer penetration in the region, with only 68 percent of internet users consuming online services.
Resilience Gives way to Resurgence
Overall, the Philippines was the fastest growing market in the region, driven by strict lockdowns as well as a tipping point on the adoption of certain digital services. Looking at 2025, the overall internet economy will likely reach $40 billion in value, growing at 24 percent compound annual growth rate (CAGR).
Digital Merchants Take Off
In the Philippines, 39 percent of digital merchants believe they would not have survived the pandemic if not for digital platforms.
Digital merchants now use an average of two digital platforms, but profitability remains a top concern.
Digital financial services saw very rapid growth this year, not only from e-wallets but also from the national payment rail. Of the digital merchants surveyed, 97 percent now accept digital payments, while 67 percent have adopted digital lending solutions.
Many are also embracing digital tools to engage with their customers, with 68 percent expecting to increase usage of digital marketing tools in the next five years.