Southeast Asia’s internet economy to see marginal 5% growth this year due to Covid-19

Despite the headwinds from Covid-19, Southeast Asia’s internet economy remains resilient as it’s set to grow to US$105 billion by the end of 2020, increasing by 5% from US$100 billion last year, according to the latest report by Google, Temasek, Bain & Company.

The e-Conomy SEA 2020 report attributes this to the rise of online users in the region. Around 400 million people or 70% of Southeast Asia’s population is now online, jumping by 40 million since 2019.

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Covid-19 has accelerated digital consumption, with one in every three consumers trying digital services for the first time. Online education (55%), groceries (47%), and lending (44%) services benefited the most from this influx of new digital consumers. Vietnam saw the largest rise in new digital consumers, followed by Indonesia and the Philippines.

The report also found that while the internet economies in Malaysia, the Philippines, and Thailand recorded a single-digit growth of 6% to 7% from last year, Vietnam and Indonesia continued to grow at 16% and 11%, respectively.

Singapore was the only country that slipped, with its digital economy dipping by 24% since 2019. The drop can be attibuted to a 70% year-on-year decline in the online travel market. Excluding this vertical, the city-state’s internet economy saw over 20% growth, thanks to its strong ecommerce sector and status as a hub for startups that attract investment. Singapore witnessed 325 investment deals in the first half of 2020, with a total value of US$2.5 billion.

Ecommerce and online media have seen the least impact from Covid-19, the report said.

The ecommerce space saw a massive 63% growth, with its value soaring to US$62 billion this year from US$38 billion a year earlier. As such, it’s now expected to be worth US$172 billion by 2025 instead of the US$150 billion estimate from last year’s report.

Lasting adoption of ecommerce is expected to continue across Southeast Asia as most first-time users said that they would keep making transactions online even after the pandemic.

Meanwhile, online media grew by 22% to be valued at US$17 billion this year from US$14 billion in 2019. Music and video subscription as well as online gaming have seen a surge in new-user acquisition, up to 2x in some markets during the lockdown.

But the report also showed that the transportation and food sector as well as online travel fell by 11% and 58%, respectively. Online travel contracted to US$14 billion in 2020 from US$34 billion in the previous year, while transportation and food went down to US$11 billion this year from US$13 billion in 2019.

This clearly shows that the impact of the pandemic as people turned to ecommerce and curbed their travel, with many companies opting for remote working options.

Apart from lending, digital financial services also gained more users. The lending loan book, however, remained at US$23 billion – same as last year – as the supply was affected by Covid-19.

However, investment assets under management (AuM) shot up to US$21 billion, climbing by 116% from US$10 billion a year before. Remittance flows and online insurance services were also robust, hitting US$15 billion and US$2 billion, respectively.