Google, Temasek, Bain report on Southeast Asia digital economy in 2022

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Two women using their mobile phones at Raffles Place, the central business district area of Singapore.

Nicky Loh | Bloomberg | Getty Images

SINGAPORE — South East Asia’s top digital economies grew faster than expected in 2022 and is set to reach $200 billion in total value of transactions made this year, according to a new report by Google, Temasek and Bain & Company.

The milestone comes three years ahead of earlier projections and is a 20% increase from last year’s $161 billion in gross merchandize value (GMV). An earlier report in 2016 estimated the internet economy in the region’s six major countries will close in on $200 billion in GMV by 2025.

The six major economies covered in the report are: Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. The report did not address the populations of Brunei, Cambodia, Laos and Myanmar, as well as East Timor and Papua New Guinea.

“After years of acceleration, digital adoption growth is normalising,” said the report released Thursday.

Southeast Asia continues to see growth in the number of internet users — with 20 million new users added in 2022, raising the total number of users to 460 million.

However, that growth is starting to slow, and was just 4% in 2022 compared to a year ago. That’s compared to a 10% year-on-year increase in 2021 and 11% growth in 2020, at the height of the coronavirus pandemic.

Growth drivers

E-commerce continues to drive the growth in the region despite the resumption of offline shopping as pandemic lockdowns lifted. GMV in the sector grew 16% to $131 billion in 2022.

However, the next three years may see a slowdown, the report said, projecting growth in the sector to e-commerce to grow at a 17% CAGR from 2022 to 2025.

“E-commerce continues to accelerate, food delivery and online media are returning to pre-pandemic growth levels, while travel and transport recovery to pre-COVID levels will take time,” the report said.

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Another growth driver, digital financial services, which includes payments, remittances, lending, investments and insurance, have seen healthy growth from 2021 to 2022, thanks to offline-to-online behavior shifts post-pandemic, wrote the report.

Among these services, insurance recorded the highest, growing 31% year-on-year while lending grew 25% year-on-year.

Growth in digital adoption slows

Investors will be cautious in the short-term as most do not expect a return to 2021 deal activity and valuation peaks in the next couple of years.

All six countries are set to post double-digit growth in GMV from 2022 to 2025.

Vietnam is in the lead and set to post a 31% growth in GMV from $23 billion in 2022 to $49 billion in 2025, the report showed. The Philippines is right behind with an expected 20% growth in GMV, from $20 billion in 2022 to $35 billion in 2025.

Cautious investors

There was continued strong momentum in investments in the first half of 2022, but investors are becoming more prudent.

“Investors will be cautious in the short-term as most do not expect a return to 2021 deal activity and valuation peaks in the next couple of years,” the report said.

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“Nonetheless, most investors remain bullish in SEA’s medium- to long-term potential,” but venture capitalists remain vested in the region with $15 billion dry powder to sustain deals, continued the report.

“We note increasing interest in emerging markets, like the Philippines and Vietnam, and in nascent sectors, like SaaS and Web3.”

Early-stagers are flourishing, while late-stage investments are impacted by dim public listing prospects, according to the report.

Singapore-based ride-hailing and food delivery giant Grab saw a less-than-stellar stock debut at the end of 2021 despite being the largest initial public offering by a Southeast Asian company in U.S. history.

FinAccel — the parent of Indonesia’s buy now pay later platform Kredivo — canceled its IPO plans in October due to unfavorable market conditions.



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