Southeast Asia’s internet economy is expected to experience its slowest growth this year as consumers reduce online spending due to rising inflation and interest rates. Research from Google, Temasek Holding Pte, and Bain & Co. projects online spending in the region will increase by around 15% this year, reaching approximately $263 billion.
This represents a decline from last year’s 17% growth and could be the lowest growth rate in seven years. Private funding in the digital economy is also projected to hit a low this year. With consumers tightening their belts, major tech companies like Amazon.com, Alibaba Group, Grab, Sea, and GoTo Group are intensifying their fight for dominance in the online delivery market.
Southeast Asia digital economy slowdown
Regional tech firms face mounting pressure from investors to show profits, leading to cost-cutting measures and scaled-down operations. As user growth stagnates, businesses are struggling to maintain healthy margins.
Despite the downturn, the Southeast Asian internet economy is set to report $11 billion in profit on $89 billion in total revenue for the year, driven largely by the online media industry and the region’s strong macroeconomic conditions. The collaborative report highlights increasing internet literacy, digital security awareness, and the use of AI for business as key factors shaping the future of Southeast Asia’s digital economy. However, investment deals involving tech companies fell to 306 in the first half of 2024, compared to 564 last year, with investors focusing more on software and sustainability technology due to more expensive capital.
The region is becoming more attractive for data center investments, with tech giants spending approximately $30 billion on data center construction for AI in the first six months of the year. Companies like Microsoft, Apple, and Nvidia have been particularly active, engaging in talks with Indonesia and Malaysia for potential investments.
