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The Philippines has emerged as the fastest-growing economy in Southeast Asia, according to a recent report by Google, Temasek, and Bain & Company.
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Southeast Asia’s digital economy has been booming lately, delivering 2.5X profits in two years.
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In the last two years, key players achieved significant strides towards profitability, with tighter commissions, targeted incentives, and new revenue streams, driving a 2.5 rise in profits
The Philippines has emerged as the fastest-growing internet economy in Southeast Asia in the latest report by Google, Temasek, and Bain & Company.
The region has been performing well recently with Southeast Asia’s digital economy booming, delivering 2.5X profits in two years.
Google’s latest e-Conomy SEA Report showed a 20% growth of the entire digital economy based on gross merchandise value, rising from $26 billion last year to $31 billion this year.
The 9th edition of the eConomy SEA Report entitled ‘Profits on the Rise, Harnessing SEA’s Advantage’ came out this week.
For the first time, the report examined the health of the digital economy from the perspective of profit.
In the last two years, key players achieved significant strides towards profitability, with tighter commissions, targeted incentives, and new revenue streams, driving a 2.5 rise in profits.
For the Philippines, the growth was attributed to robust domestic consumption, a revitalized services sector, and higher remittances from overseas workers. This indicates that stabilizing inflation and declining unemployment rates actually stimulate private consumption and drive higher demand for digital services.
This means that the Philippines is on its way to becoming a major player in the global digital economy.
Trade and Industry Secretary Ma. Cristina Roque welcomed the report.
In a statement, she said: “The results of the 2024 Google, Temasek, and Bain & Co. study reaffirms the effectiveness of the administration’s digital economy strategies. The country’s whole-of-government approach fosters economic growth, drives innovation, and ultimately improves the lives of all Filipinos.”
Part of this effort is the Trade department’s digitalization of micro, small, and medium enterprises; the Bangko Sentral’s promotion of digital payments; the Finance department’s adoption of a digital taxation and customs policy; and Congress’ passage of relevant laws, she said.
The 2024 e-Conomy SEA report recognized recent reforms, including the Internet Transactions Act and the 12% value added tax on non-resident digital services as important factors in setting a level playing field between local and global businesses.
The report further validates the UNCTAD Digital Economy Report 2024 findings that identified the Philippines as one of the leaders in e-commerce sales growth among 43 economies.
Roque said she views the country’s thriving e-commerce sector as an enabler of further economic growth, job creation, and higher business and government revenues.
The report sees the digital economy reaching $263 billion in gross merchandise value this year, which is 15% higher than last year.
The report says that Southeast Asia is emerging as a global hub for AI innovation and adoption.
“With significant investments in AI infrastructure and a thriving ecosystem of startups and developers, the region is poised to unlock the transformative power of AI across various sectors,” it said.
Further, there is rising consumer interest in exploring and adopting AI solutions, with searches for AI rising by 11 times in the past four years.
SEA provides a large and receptive market for AI-powered products and services, owing to its young and growing population.
There is, however, a red flag. With a more complex online landscape, a collective effort to address digital trust is essential “as cybercrimes continue to pose a threat to the region’s burgeoning digital economy.”
There are several key findings from the 2024 report.
For one, profitability in SEA’s digital economy is on the rise.
Key findings from this year’s report include:
- Profitability in SEA’s digital economy is on the rise. Key players in the region’s digital economy have progressed towards profitability while maintaining double-digit growth.
- Growth is expected to continue with deeper digital participation among users, effective monetization strategies, and the recovery of pandemic-impacted sectors.
- E-commerce now driven mostly by existing customers is expected to reach $159 billion this year.
- Video commerce, in particular, has boomed. From less than 5% in 2022, it has risen to 20% of e-commerce GMV.
- Food delivery is also gaining momentum. This year, revenue is set to grow 54% year-on-year.
- The transport sector, meanwhile, has exceeded pre-pandemic levels with revenue expected to grow 36% YoY. Online travel has outperformed the overall digital economy in terms of gross travel bookings growth, driven by intra-regional travel within Asia Pacific.
Another key finding is investors show confidence in the long-term potential of SEA.
While the funding landscape is subdued for now, investors have shown a cautious optimism by directing almost 50% of investments towards nascent sectors.
Last year, the report noted four enablers to revitalize the funding landscape: realistic entry valuations, proven monetization models, a clear path to profitability, and dependable exit pathways.
The last is still a work in progress as capital market conditions “continue to be challenging,” said the report.
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