- From 2023 to 2025, the local digital economy is set to continue its double-digit climb towards $35B, one of the fastest-growing in Southeast Asia
- The country’s digital economy has the fastest growing Transport and Food, Online Travel, and Online Media sectors in Southeast Asia in 2023
- Online Travel is the fastest growing sector locally from 2022 – 2023 at 88% growth rate
The latest e-Conomy SEA report, titled Reaching new heights: Navigating the path to profitable growth forecasts substantial growth for the Philippine digital economy. It projects a surge to $24 billion in Gross Merchandise Value (GMV) in 2023, driven by a 13% Compound Annual Growth Rate (CAGR) propelled mainly by E-commerce. Looking ahead to 2025, the digital economy is poised for a robust climb, aiming for $35 billion GMV, growing at a striking 20% CAGR, positioning the Philippines as one of Southeast Asia’s swiftest-growing digital economies.
This comprehensive annual report draws insights from Google Trends, Temasek insights, Bain & Company analysis, industry sources, and expert interviews. It focuses on the digital economies of six SEA countries: Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.
This year’s report introduces revenue numbers alongside GMV figures, offering a more comprehensive view of how businesses have surged ahead amid macroeconomic challenges. Notably, the report indicates that SEA’s digital economy revenue is anticipated to reach $100 billion this year, expanding 1.7 times faster than the region’s GMV. It delves deeply into the potential of increased digital engagement to unlock further growth in the region’s digital landscape.
E-commerce dominates 70% of the overall online activities, continuing as the primary driver of growth for the Philippine digital economy. With the transition from informal to organized digital platforms, E-commerce is forecasted to hit $24 billion GMV by 2025, growing at a robust 21% CAGR. Following this is Online Media, expected to reach $5 billion, and Online Travel projected to rise to $4 billion by 2025.
The Online Travel sector exhibits the most substantial growth from 2022 to 2023, increasing by 88% due to the sustained momentum in tourism.
This year, the local digital economy stands out with the fastest-growing sectors in SEA, namely Transport and Food, Online Media, and Online Travel. Both domestic and regional transport services are expanding to outlying cities, fostering long-term growth. To tap into these segments, businesses are broadening their two-wheeler offerings as a more cost-effective transportation alternative.
Here are the rest of the key insights into the Philippine digital economy:
- Healthy expansion is set to continue – In addition to rising domestic demand, a recovery in the services sector (including services exports) will drive growth over the medium to long term. Meanwhile, private consumption will see an uptick driven by lower unemployment rate, increased remittances from overseas, and tourism recovery.
- Online Media which comprises music, video streaming, and online gaming is projected to grow at $3B GMV in 2023, at 13% CAGR. This sector is also expected to reach $5B by 2025 at 19% CAGR.
- Transport and Food Delivery are projected to reach $2B GMV in 2023 and continue to grow at 19% CAGR to hit $3B GMV in 2025. The momentum in mobility–which includes return to office, travel, eating out, and brick-and-mortar shopping–contributes to Transport’s growth. In fact, the Philippines has the highest spend index for this sector among High Value Users (HVUs) in SEA which is more than 21% higher than Non High Value Users (NHVUs).
- Online Travel is back with 88% growth–the highest growth rate in the local digital economy from 2022 to 2023. As recovery to pre-pandemic levels continues, travel is on its track to hit $3B GMV this year and is growing at 18% CAGR by 2025 where the sector is expected to reach $4B GMV.
- Digital Payments continues to gain traction and is set to hit $93B this year and $126B by 2025. E-wallet and account-to-account (A2A) payment rails will see the fastest growth due to lower costs to merchants. Informal A2A payments are expected to grow in merchant adoption as they look to sidestep formal registration of business accounts with digital payments providers.
“Despite macroeconomic challenges, the country’s digital economy is set to sustain its impressive double-digit climb, targeting $35 billion by 2025, showcasing resilience and creating opportunities for Filipinos,” remarked Nikki Del Gallego, Head of Data and Insights at Google Philippines. “This momentum is expected to persist, driven by the vast potential of AI and increased digital engagement of internet users beyond Metro Manila, heralding potential medium to long-term growth.”
Bennett Aquino, Partner at Bain & Company, reflected, “The continuous double-digit growth in Southeast Asia’s digital economy GMV and revenue, surpassing the $100 billion revenue mark in 2023 despite challenging economic conditions, demonstrates the resilience of this digital landscape. Key players are deciphering the monetization puzzle, making strides toward healthier unit economics. Despite external challenges, optimism prevails for substantial, sustained growth in the digital economies of both SEA and the Philippines.”
Secretary Fred Pascual of the Department of Trade and Industry (DTI) emphasized, “It’s truly remarkable that the Philippine digital economy is charting a path of sustained double-digit growth. The DTI remains dedicated, employing a whole-of-government approach, collaborating with diverse partners, including Google, to equip Filipinos with the tools needed to benefit from the burgeoning digital economy through various upskilling opportunities.”
AI’s Role in Driving Profitable Growth
Companies seeking profitable growth will rely on enhancing operational efficiency and improving user experiences, wherein AI can play a pivotal role.
AI offers significant value in inventory management, route optimization, and personalized content recommendations in online media, fostering deeper engagement and increased digital participation. Moreover, it aids in fraud detection and prevention, heightening security for both consumers and merchants.
In the pursuit of building a Digital Philippines powered by AI, Google has launched no-cost generative AI skilling courses through its Cloud Skills Boost Program, making AI career paths more accessible. Additionally, through the Google for AI Startups Cloud Program, Google supports early-stage startups (Series A startups) leveraging AI as a core technology to develop innovative products or solutions.
