SOUTH-EAST Asia may have hit US$200 billion in gross merchandise value (GMV) from e-commerce, travel, food and transport, and online media sectors in 2022, three years ahead of the forecast in 2016. Now, the 2022 e-Conomy report by Temasek, Google and Bain forecasts digital economy GMV to hit US$330 billion by 2025, and US$600 billion to US$1 trillion by 2030 across six markets of Singapore, Malaysia, Indonesia, the Phillppines, Indonesia and Thailand.

The report also cautions that macroeconomic headwinds have started to buffet the region, which would impact the growth in the near term.

The pandemic’s effect in supercharging digital adoption has resulted in digital players’ strategy shifting from acquisition to engagement. Of the 460 million Internet users in 2022, 100 million users have come online in the last three years.

“We are seeing market leaders take a longer-term recovery strategy and invest in capabilities to target markets and consumer segments with higher value generation potential,” said Florian Hoppe, partner and head of digital practice in Asia-Pacific, Bain & Company.

The different sectors in the digital economy will follow different growth lines, with the report forecasting the e-commerce sector to continue holding firm in its position, with a forecast 16 per cent GMV growth for 2022. Food delivery and online media are likely to see growth taper after the spike during the pandemic, with GMV growth at 14 per cent and 9 per cent respectively. Transport and online travel sectors are expected to see a strong recovery at 43 per cent and 115 per cent GMV growth as international travel resumes. But consumer demand is expected to suffer from rising prices, and headwinds such as increasing fuel prices, supply shortages and continuing travel restrictions to result in a gradual recovery.

“The acceleration of the digital economy during the pandemic has unlocked significant value for industry sectors, but it is critical to recognise that the new macro turbulences ahead will see different growth archetypes emerging across verticals,” said Hoppe.

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Digital financial services is forecast to grow, with optimistic forecasts across payments, remittance flow, lending loan book, investments and insurance. In particular, the lending loan book is expected to grow from US$50 billion in 2022 to US$325 billion in 2030, and investment assets under management from US$39 billion in 2022 to US$530 billion in 2030.

Funding for tech investments in South-east Asia has growth year on year, with funding value for H1 2022 at US$13.2 billion, above US$11.5 billion in H1 2021, but a drop from US$15.2 billion in H2 2021. Early-stage investments are continuing to see investments coming in, with ticket sizes growing between 40 per cent and 60 per cent. Growth-stage investments are also growing, hitting record highs in 2022, but late-stage investments are seeing funding dry up, as initial public offerings fall from 15 in 2021 to just four in H1 2022.

Of the US$13.2 billion invested in the region for H1 2022, Singapore (57 per cent) and Indonesia (25 per cent) have secured the bulk of the investments. However, Vietnam, Indonesia and the Philippines are likely to attract more investors in the long term. (*see amendment note)

Environment, social and governance (ESG) issues are now emerging among consumer interest, but despite 40 per cent of consumers saying they care about sustainability, only 3 to 15 per cent of consumers across the region act on their intention with their purchasing.

Fock Wai Hoong, deputy head, technology & consumer and South-east Asia, Temasek, said: “South-east Asia’s digital economy has the potential to reach greater heights and at the same time drive social progress and make a positive impact on the environment.”

Closer to home, Singapore’s digital economy is expected to grow by 22 per cent to hit US$18 billion in 2022, with the potential to hit about US$30 billion in 2025. This growth will be driven by e-commerce, which is expected to hit US$11 billion in 2025. Digital financial services continue to attract the most investor interest, taking up 25 per cent of the US$1.9 billion investment pool in H1 2022.

Singapore’s interest in sustainability has grown 2.8 times, although only 32 per cent of Singaporeans are willing to spend 5 per cent more on a sustainable product or service, the least in the region.

Said Stephanie Davis, vice-president, Google Southeast Asia: “As an advanced country, Singapore is well-placed to play a leading role in the growth of South-east Asia’s digital economy and ESG adoption for investors, consumers, businesses and governments.”

*Amendment note: A previous version of this story incorrectly stated that US$1.2 billion was invested in South-East Asia.