Growth in Southeast Asia’s Digital Economy Slows Slightly in 2024
Growth in Southeast Asia’s Digital Economy Slows Slightly in 2024
The region’s online economy is beginning to show signs of maturity, as firms attempt to pivot from growth to profitability.
Southeast Asia’s digital economy continues to expand at a rapid pace, but growth is finally starting to slow as consumer demand slackens and companies begin to emphasize profits over raw revenue gains, according to a new report.
The e-Conomy SEA 2024 report, jointly compiled by the tech giant Google, Singapore’s Temasek, and the venture capital firm Bain & Company, focuses on Southeast Asia’s six largest and most digitally connected economies: Indonesia, Malaysia, Singapore, Thailand, the Philippines, and Vietnam.
The report, released yesterday, said that the growth of these nations’ digital economies continued to be underpinned by “robust macroeconomic conditions.”
However, while online spending in the region will rise about 15 percent this year to $263 billion, this represents the lowest rate of growth since 2017, down from 17 percent last year.
That this qualifies as a slowdown speaks to the breakneck pace of growth in Southeast Asia’s digital economy, which was worth just $31 billion in 2015. This easing growth is due to a number of factors. One is that consumers in the region are curbing their spending to cope with elevated inflation and interest rates.
Another is that the expansion of internet access across these six nations, which has driven some of the remarkable growth of the past decade, has now topped out in the six countries covered by the report. As a result, the report stated, “sustainable growth will come from increased consumption of digital services, rather than expanded internet access.”
Third, the slowing growth is also a reflection of the increasing pressure that investors are placing on companies to begin turning a profit, after years of prioritizing growth. Many have done this by “doubling down on monetization strategies,” which range from cutting jobs and other ancillary costs, to “running more disciplined promotional and marketing campaigns.” To take one example, the Indonesian ride-hailing and food delivery company GoTo in January announced its first-ever quarterly profit on an adjusted basis, after cutting thousands of jobs and slashing its marketing budget.
According to the report, revenue in the digital economy rose to $89 billion, 14 percent up on last year. Profits increased by $11 billion (24 percent) in the same period, following a whopping 101 percent increase from 2022 to 2023.
A good deal of the growth in the region’s digital economy has come from the continued growth in e-commerce, which is set to clock $159 billion in turnover this year, up from $138 billion in 2023. A particular area of growth has been video commerce, which now accounts for 20 percent of e-commerce value, up from less than 5 percent in 2022. Digital financial services have also grown significantly, with revenue increasing from $22 billion in 2022 to $33 billion in 2024, in large part due to “the widespread adoption of QR codes and increased access to app-based credit solutions.”
The report notes that the private funding of companies in Southeast Asia has dropped to its lowest level on record, in large part because the region’s “pioneer cohort of unicorns” has reached maturity. At the same time, the region’s tech-savvy, upwardly-mobile population has prompted increased attention from foreign tech firms. This year, the CEOs of the U.S. tech giants Apple, Microsoft, and Nvidia have traveled to the region, announcing billions of dollars in investments, particularly in data centers designed to support the expansion of artificial intelligence (AI) services. According to the report, foreign technology companies committed around $30 billion to build AI-ready data centers, which “will empower accelerated computing, AI services, and data growth – both regionally and globally.”
Looking forward, the e-Conomy SEA report notes that with so much of the region now online, and the region well positioned to capitalize on the benefits of AI technologies, sustainable growth depends on online trust and security, particularly regarding cyberscams – many of which are operated by criminals based in Southeast Asia. While there has been a 24 percent reduction in scam incidents over the past two years, the report stated, the average loss per incident has risen by 41 percent.
“While the proportion of consumers falling victim to scams has been trending downwards since 2022, cybercriminals have become more adept at extracting greater value from successful attacks,” it stated.
It said that over the coming years, Southeast Asia’s maturing digital economy “will be shaped by increasing user sophistication, the growing importance of digital safety and security, and the need to unlock greater business value from AI.”
