E-commerce seen to drive PHL digital economy surge to $35B

THE Philippines’ digital economy is expected to reach a gross merchandise value (GMV) of $35 billion by 2025, growing at a 20% compound annual growth rate (CAGR) from $20 billion today, according to a report by Google, Temasek, and Bain & Co.

The main driver will be the e-commerce sector, which is seen to hit $22 billion by 2025 at a 17% CAGR, the e-Conomy Southeast Asia Report 2022 released on Thursday shows.

The country’s overall digital economy is expected to hit a GMV of $100-150 billion by 2030, according to the report.

Other sectors contributing to the country’s digital economy are online travel, which is expected to grow at a CAGR of 44% to $4 billion by 2025, transport and food, which is seen to grow at a CAGR of 29% to $4 billion, and online media, which is projected to grow at a CAGR of 18% to $5 billion.

The digital financial services sector’s growth will be sustained with lending and remittance seen to hit $8 billion by 2025.

Payments will grow at a CAGR of 18% to $123 billion by 2025, while investments will improve at a CAGR of 50% to $1 billion, the report showed. Insurance will likewise grow at a CAGR of 51% to $0.4 billion.

Both deal value and activity increased in the first half of 2022, with 68 deals and a private funding value of $800 million, up from $500 million and 66 deals in the same period last year.

Digital financial services captured 56% of total investor funding in the first half of the year, raising $450 million. This is followed by e-commerce, transport, digital media, and travel.

The Philippines is likely to attract more investors over the longer term, with deal activities seen to increase by 73% between 2025 and 2030, according to the report.

The Philippines is one of the “hot spots” for investments in the years ahead, it noted.

“Indonesia, Vietnam, and the Philippines are clear hot spots for growth and investments in the years ahead, driven by heightened digital savviness and affluence.”

In the region, Vietnam is expected to have the biggest increase in terms of deal activity between 2025 and 2030 versus today at 83%, followed by Indonesia and the Philippines at 73%, Singapore at 50%, Thailand at 47%, and Malaysia at 30%.

“Singapore will continue to serve as a mature investment market, with a strong pipeline of attractive regional startups,” the report said.

“It’s still early days for investments in the rest of ASEAN (Association of Southeast Asian Nations), where enablers for growth are not yet in place,” it added.

This year, Singapore and Indonesia remain the leading investment destinations, with their shares in private funding value of $13 billion in the first half at 57% and 25%, respectively.

The report also said that digital financial services have overtaken e-commerce as the region’s top investment sector.

The adoption and usage of digital financial services in the region have “flourished” across the board, it said.

In the Philippines, Indonesia, and Vietnam, the “right to win” of digital banks is highest at level 3, owing to the 75% unbanked or underbanked population. Thailand and Malaysia come next, with an unbanked or underbanked population of 46% and 28%, respectively.

“Payments retain the lion’s share of deal activities,” the report noted. This is followed by lending, investments, insurance, and remittance. — Arjay L. Balinbin