Google, Temasek, and Bain & Company released today the sixth edition of the e-Conomy Southeast Asia (SEA) Report — Roaring 20’s: The SEA Digital Decade.
Providing a ten-year outlook for the first time, the e-Conomy report highlights that the region 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, SEA is estimated to reach USD174 billion in GMV by the end of 2021. The region’s digital economy is further expected to reach ~USD360 billion by 2025, outgrowing the earlier projection of USD300 billion.
The Philippines as the fastest growing digital market in Southeast Asia
The report states that SEA internet economies—Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam—are showing double-digit growth with the Philippines leading the way. From 2020 to 2021, it recorded the region’s highest growth rate of 93%, predicted to grow from USD9 billion to USD17 billion, and by 2025, it is expected to reach USD40 billion. The Philippines has one of the region’s highest proportions of new users who started consuming online during the pandemic, with 20% of the country’s digital consumers using a digital service for the first time since March 2020.
Much like the rest of the region, the Philippines is entering its digital decade as the internet increasingly becomes an integral part of consumers’ daily lives. The growth of the digital market in the country was driven by the explosive 132% growth in e-commerce and double-digit growth across all sectors including food delivery services.
Here are some key insights about the Philippine digital economy from this year’s report:
Consumers cruise into a new way of life
The Philippines has seen 12M new digital consumers since the start of the pandemic (up to the first half of 2021), of which 63% are from non-metro areas and 99% 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% 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% 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 USD40B in value, growing at 24% CAGR.
Digital merchants take off
In the Philippines, 39% 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% now accept digital payments, while 67% have adopted digital lending solutions. Many are also embracing digital tools to engage with their customers, with 68% expecting to increase usage of digital marketing tools in the next five years.
“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. The findings of the e-Conomy Southeast Asia (SEA) Report are encouraging, especially with the Philippines as the fastest growing digital economy now in the region. Google is committed to helping Filipinos maximize the opportunities of going digital and helping the country shape an internet economy that is equitable, safe, and inclusive through programs and products that improve lives,” said Bernadette Nacario, country director at Google Philippines.
“The pandemic has led to enduring digital adoption in Southeast Asia, which has propelled its internet economy to new heights. Temasek looks forward to increasing our investments in Southeast Asia’s digital champions, using our capital to catalyse digital solutions and accelerate economic growth and job opportunities for our local communities,” said Rohit Sipahimalani, chief investment strategist and head of Temasek South East Asia.
“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. “There remains ample headroom for growth as long as digital enablers continue to develop. For example, we saw a strong adoption of digital payment methods such as e-wallets and national real-time payment rails which facilitated the growth of the internet economy.”