Southeast Asia's Digital Economy Projected to Reach $368B by 2026

SINGAPORE – The digital economy of Southeast Asia is poised for impressive growth, with projections indicating it will surge to approximately US$368 billion by the end of 2026. This marks a notable 17% increase from the US$315 billion predicted for 2025. The insights come from the annual e-Conomy SEA report released on October 21 by tech leader Google, Singapore-based investment firm Temasek, and consultancy Bain & Company.

Key Highlights of the Growth Forecast

The e-Conomy SEA report analyzes the digital landscapes of ten countries, including Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. The report quantifies digital economic activities through gross merchandise value, taking into account transactions across e-commerce and transportation booking platforms.

Among these nations, Singapore's digital economy is expected to reach US$31 billion by 2026, reflecting an 8% growth from 2025. Sectors contributing significantly to this surge include e-commerce, travel, online media, and food delivery services.

Resilience Amid Challenges

Florian Hoppe, a partner at Bain, highlighted the resilience of Southeast Asia’s digital economy despite ongoing geopolitical and macroeconomic hurdles. He shared that the GDP growth rate is anticipated to hover between 4% and 5%. As per the latest predictions by the International Monetary Fund, the ASEAN region's GDP growth is expected to be 4.9% in 2026 and 4.7% in 2027, outpacing the global growth forecast of 3.1% and 3.4% for the same years.

Impact of AI on E-commerce

AI technologies are making a considerable impact, particularly in e-commerce, which remains the largest segment of the digital market. The e-commerce sector is predicted to grow to US$226 billion by 2026, an increase of 18% from US$191 billion in 2025. Various AI-driven tools are now available for sellers, enabling them to create engaging short videos to showcase products and tailor shopping experiences with personalized recommendations.

Notably, in a survey conducted across six Southeast Asian countries (Indonesia, Malaysia, Singapore, Thailand, Vietnam, and the Philippines), around 69% of consumers reported utilizing AI to compare products, leading to enhanced conversion rates for sellers by 10% to 15%.

Trends Shaping Online Travel and Media

The online travel industry is expected to experience substantial growth, with the gross merchandise value rising to US$59 billion in 2026, representing a 10% increase from US$53 billion the previous year. Factors driving this growth include AI technologies assisting customers in trip planning and bookings, alongside rising prices in air travel.

The online media sector is also set to flourish, forecasting US$44 billion in contributions by 2026, up 22% from US$36 billion in 2025. This surge is fueled primarily by the effectiveness of targeted online advertising and the increasing popularity of short-form content.

Furthermore, sectors like transport bookings and food delivery are on track to achieve a gross merchandise value of US$40 billion by the end of 2026, with a 15% increase from US$35 billion in 2025.

The Rise of Generative AI

A striking statistic from the report indicates that generative AI usage has reached a remarkable level, with 243 million people (58% of the working population) in Southeast Asia engaging with the technology. This adoption has been swift, compared to the decade-long journey of internet emergence.

However, while rapid adoption is evident, the report did note that deeper usage has yet to materialize fully across the region. Segments of private funding for AI have surged drastically in recent times, showcasing the potential seen in AI technologies for driving future growth.

As Southeast Asia continues to advance, it is expected that investments will focus more on innovative solutions and products, significantly influenced by the integration of AI technologies.