COVID-19 boosts SE Asia online economy past US$100B

Photo courtesy of Google

The COVID-19 pandemic ushered into the internet 40 million first time users in Southeast Asia, pushing the region’s digital economy past the US$100 billion mark, according to a joint report from Google, Temasek and Bain & Company.

The latest edition of their “e-Conomy SEA” report shows that despite a challenging year, Southeast Asia’s resilient digital economy accelerates, and is set to cross $300 billion by 2025.

This year, more than one-third of digital service consumers started using a new online service due to COVID-19. Among them, 94% intend to continue using the service beyond the pandemic. 

A large number of the new digital consumers are from non-metropolitan areas, specifically in Malaysia, Indonesia and the Philippines. The report also covers Singapore, Thailand and Vietnam.

Across industries, e-commerce has emerged as the largest vertical, growing 63% to reach $62 billion in 2020, and is expected to continue its growth trajectory, reaching $172 billion by 2025. 

On the other hand, and not surprisingly, travel was the most affected segment, contracting 58% to $14 billion.

In this time of crisis, the adoption and usage of e-commerce, food delivery, and online media have surged. Digital financial services are set for a tailwind in the long run as consumers and small and medium sized enterprises (SMEs) have become more receptive to online transactions.

The hardest-hit sector in the region is online travel, but there are signs of recovery in domestic tourism, particularly among hotels and holiday rentals within driving distance from major metropolitan areas. Online travel is expected to bounce back to $60 billion by 2025.

Still, the pandemic has brought about the growth in adoption of nascent sectors such as HealthTech and EdTech, prompting growing investment in these sectors.

The regional tech investment landscape continues to flourish with an increase of 17% in the number of deals between the first half of 2019 and 2020. The total deal value declined slightly from $7.7 billion to $6.3 billion, over the same period, attributable to the slowdown in big-ticket unicorn investments.

Southeast Asia continues to make progress in overcoming the initial challenges of the internet economy by making Internet access more affordable and strengthening consumers’ trust in digital services.

The average number of cash transactions declined from 48% pre-COVID-19 to 37% post-COVID-19, while the exponential spike in e-commerce prompted numerous logistical improvements across the region. However, talent constraints remain a pressing concern as companies look for skilled workers who are critical enablers to a fast-growing digital economy.

“The digital adoption that was projected to happen over several years has accelerated,” said Stephanie Davis, VP of Google Southeast Asia. “With its young, diverse and mobile-first population, and a host of innovative start-ups, Southeast Asia will continue to define the future of digital ecosystems.”