Two women use their mobile phones at Raffles Place, Singapore’s central business district.
Nicky Loh | Bloomberg | beautiful pictures
SINGAPORE – Southeast Asia’s leading digital economies grow faster than expected in 2022 and are expected to reach $200 billion in total transaction value this year, according to a new report. by Google, Temasek and Bain & Company.
The milestone comes three years ahead of previous projections and is up 20% from last year’s $161 billion gross merchandise value (GMV). An earlier report in 2016 estimated that the internet economy in six major countries in the region would reach GMV revenues of over $200 billion by 2025.
The six major economies mentioned in the report are: Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam. The report does not mention the populations of Brunei, Cambodia, Laos and Myanmar, as well as East Timor and Papua New Guinea.
The report released on Thursday said: “After years of acceleration, the rate of growth in digital adoption is normalizing.
Southeast Asia continues to see growth in the number of Internet users – with 20 million new users added by 2022, bringing the total number of users to 460 million.
However, that rate of growth is starting to slow and is only 4% in 2022 from a year ago. This compares with an annual increase of 10% in 2021 and 11% in 2020, at the height of the coronavirus pandemic.
Growth driver
E-commerce continues to drive growth in the region although offline shopping continues to recover as pandemic closures are lifted. GMV in this sector has grown 16% to $131 billion by 2022.
However, the report said that the next three years could see a slowdown, forecasting growth in the e-commerce sector to grow at a CAGR of 17% from 2022 to 2025.
“E-commerce continues to accelerate, food delivery and online media are returning to pre-pandemic growth, while the recovery of travel and transportation to pre-COVID levels will take a long time. time,” the report said.
Another growth driver, digital financial services, including payments, remittances, lending, investments, and insurance, experienced healthy growth between 2021 and 2022, driven by behavioral from offline to online changes after the pandemic, the report said.
Of these services, insurance recorded the highest, growing 31% year-on-year while lending grew 25% year-over-year.
Growth in digital adoption slows
After years of acceleration, the growth rate of digital adoption is normalizing, the same report reads. This comes as Southeast Asian economies reopen their borders in 2022 after an extended shutdown and consumers continue to shop offline.
In addition, current macroeconomic conditions such as rising inflation rates have impacted Southeast Asian consumers and the digital economy. The report said rising prices, falling disposable income due to the economic downturn, as well as less consumer access to products due to supply chain disruptions while manufacturing backlogs grow, partly due to China’s zero-Covid policy.
Southeast Asia’s online economy still on track to reach $1 trillion by 2030 as online shopping becomes the norm, according to the report.
Overall, the Internet economy in six countries is predicted to reach $330 billion by 2025 if companies focus more on profits over the next three years. Some of Southeast Asia’s largest unicorns like Grab and Sea Limited has not yet recorded a profit or loss of billions of dong in 2021.
Investors will be cautious in the short term as most do not expect trading activity to return in 2021 and valuations to peak in the next few years.
All six countries experienced double-digit growth in GMV between 2022 and 2025.
Vietnam is leading the way and is expected to grow 31% of GMV from $23 billion in 2022 to $49 billion in 2025, the report shows. The Philippines is right behind with an expected 20% GMV growth, from $20 billion in 2022 to $35 billion in 2025.
Investors are cautious
Investments continue to have strong momentum in the first half of 2022, but investors are becoming more cautious.
“Investors will be cautious in the short-term as most do not expect trading activity to return to 2021 and valuations to peak in the next few years,” the report said.
“However, most investors remain optimistic about the medium- and long-term potential of SEA,” but venture capitalists still provide the region with $15 billion in dry powder to sustain transactions. The report continues.
“We note growing interest in emerging markets, such as the Philippines and Vietnam, and in nascent areas, such as SaaS and Web3.”
According to the report, those inactive investment firms are thriving, while late-stage investments are hit by a lackluster public listing outlook.
Singapore-based ride-hailing and food delivery giant Grab saw a less prominent share launch in late 2021 despite it being the company’s largest initial public offering. a Southeast Asian company in US history.
FinAccel – the Indonesian parent company that acquired the platform later Kredivo – canceled its planned IPO in October due to unfavorable market conditions.
