Despite the headwinds, the Internet economy is booming in Southeast Asia

Southeast Asia’s internet economy could reach $330 billion by 2025 despite headwinds, the industry giants’ annual report released on Thursday said.

An annual report on Southeast Asia’s internet economy says it could reach $330 billion by 2025, but notes that recent headwinds have dampened earlier growth prospects.

The document, written by Google, Singaporean giant Temasek Holdings and consulting firm Bain & Company, specified that prevailing economic uncertainty and increasing difficulties for technology companies to generate profits meant that earlier forecasts had to be revised downwards.

Last year’s report predicted that Southeast Asia’s internet economy would reach $363 billion by 2025.

Given the unfavorable global macroeconomic backdrop, with declining incomes, rising prices and reduced product availability, consumer demand in Southeast Asia is on the decline“, the three companies explained in a joint press statement.

Double digit growth!

The area is one of the world’s fastest-growing internet markets, driven by a young population, widespread smartphone use and a growing middle class.

Although it revises down forecasts made last year, the 2022 report, which covers Indonesia, Thailand, Vietnam, Singapore, Malaysia and the Philippines, nevertheless remains optimistic. He announces for this year a growth of the Internet economy by 20% to reach 200 billion dollars, anticipating for three years the predictions of the first report carried out in 2016.

These six countries are expected to see double-digit growth by 2025, with Vietnam currently having the fastest growing digital economy at 28% this year.

Indonesia, the region’s most populous country, has seen its digital economy grow by 22% this year to $77 billion, contributing about 40% of all South-East Asia’s online spending.

cautious investors

On the technology investment front, while closing deals are still seeing strong momentum, late-stage deals are suffering from “steeper declinesand a pause in IPO plans.

The report notes that international investors are becoming increasingly cautious amid rising interest rates and falling stock valuations, as initial public offering (IPO) prospects are expected to slow to a standstill over the next 12 to 18 months.

The digital financial services sector is expected to overtake e-commerce to become the region’s leading investment sector, with digital payments accounting for the majority of transactions.

In the first half of 2022, the sector saw record funding of around $4 billion.

Vietnam, Indonesia and the Philippines are expected to attract the most long-term investors, according to the report.

Regardless, investors generally expect investment deal activity to pick up from 2024“said Fock Wai Hoong, Temasek’s deputy director of Technology and Consumer Affairs and Southeast Asia region.

According to the report, venture capitalists had $15 billion to back deals at the end of 2021.

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