PH fastest growing digital market in Southeast Asia

The Philippines is the fastest growing digital investments in Southeast Asia and its digital economy is expected to reach $35 billion by 2025 and possibly $100 billion-$150 billion by 2030, the latest e-Conomy SEA Report showed in a report by Manila Bulletin.

This year’s e-Conomy SEA report titled “Through the waves, towards a sea of opportunity” combines Google Trends, Temasek insights, and Bain & Company’s analysis in addition to industry sources and expert interviews, spotlights the digital economies of six countries in Southeast Asia (SEA): Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.

Notably, the report said that the Philippines has the fastest growing digital investments sector this year in SEA, at 63 percent growth rate from 2021 to 2022. With that the Philippine digital economy to reach $20 billion by end this year, the report added.

The Philippines will attract more investors over the long term as 73 percent of investors (second highest in SEA after Vietnam) are expecting deal activity to increase in the local digital economy in the period of 2025 to 2030, it added.

With robust investment, the Philippine digital economy is on track to hit $20 billion Gross Merchandise Value (GMV) in 2022, after growing at 22 percent over the past year.

By 2025, the local digital economy is projected to reach $35 billion GMV, growing at a 20 percent Compound Annual Growth Rate (CAGR), and possibly will hit $100 to $150 billion GMV by 2030.

Growing at 17 percent from the previous year, e-commerce is expected to reach $14 billion GMV by 2022 and $22 billion GMV by 2025 as it continues to propel the local digital economy. Despite the partial resumption of in-store shopping, e-commerce accounted for 70 percent of the overall Philippine digital economy.

E-commerce, food delivery and video-on-demand are the top three digital activities of Filipinos showing an adoption rate of 88 percent, 69 percent, and 58 percent respectively among digital urban users.

The report highlighted that the country’s transport and food delivery are projected to reach $1.9 billion GMV in 2022 and continue to grow at 29 percent CAGR to hit $4 billion GMV in 2025. Demand growth is normalizing as more people eat out. The gradual return to office, increase in brick-and-mortar shopping, and the resurgence of tourism are driving recovery from lockdown lows for Transport.

The return of travel, with 180 percent year on year growth, is expected to hit $1 billion GMV in 2022. As recovery to pre-pandemic levels is likely to be gradual, travel is growing at 44 percent CAGR by 2025 where the sector is expected to reach $4 billion GMV.

The report also highlighted the country’s robust online media and digital financial services.

Online media which comprises music, video streaming and online gaming is projected to grow at $3.1 billion GMV in 2022, with YoY growth at 17 percent since the pandemic peak last year. Highest in Southeast Asia, 37 percent of paying users in the Philippines said that they play online games at least once a week.

Digital financial services show sustained growth, with lending and remittance hitting $6 billion this year. Remittance is expected to deliver $4 billion in Gross Transaction Value (GTV) at 32 percent YoY growth. In 2022, digital payments will drive $75 billion GTV and keep growing at 18 percent CAGR to reach $123 billion GTV in 2025.

“With the Philippines as the second fastest growing digital economy in SEA (next to Vietnam) in 2022 (at 22% YoY) and between 2022 to 2025 (at 20% CAGR), the country will be a hot investment hub across sectors including digital financial services,” the report stated.

Digital financial services are soaring high and the sector continues to attract investor interest, capturing 56 percent of total investor funding in 2022 and raising roughly $450M in the first half of 2022 alone. Both Filipino unicorns Mynt and Voyager are in the fintech space.