Jackie Wang, Country Director for Google Philippines and Thailand says the Philippines is the fastest growing digital economy in Southeast Asia. Arthur Fuentes, ABS-CBN News

Infra seen as key to sustaining rapid growth

MANILA - The Philippines has the fastest-growing digital economy in Southeast Asia this year according to a study by tech giant Google, Singapore's Temasek and venture capital firm Bain and Company.

Continued investment in infrastructure is also key to keeping rapid growth, officials of Google, and Bain and Company said.   

In a briefing with tech journalists on Tuesday, Jackie Wang, Country Director for Google Philippines and Thailand, said the Philippine digital economy's gross merchandise value for 2024 is seen reaching $31 billion, up 20 percent compared to last year.

"The Philippines is the fastest growing digital economy in the region, with the fastest e-commerce and digital payment sector," Wang said citing the e-Conomy SEA 2024 report.  \

This is happening even as Southeast Asia's other five largest and most digitally connected economies: Indonesia, Malaysia, Singapore, Thailand and Vietnam were poised to post an average growth of 15 percent this year, which was lower than the 17 percent clip in 2023, according to the study.

Wang said the Philippine digital economy's rapid growth was driven by the strength of the e-commerce sector, along with transport and food, online travel and online media.

E-commerce was projected to grow 23 percent this year to hit a gross merchandise value of $21 billion. By 2030, the GMV of the e-commerce sector is projected to reach $60 billion.

"From a macroeconomic perspective, the Philippines is currently enduring a robust domestic consumption. A revitalized services sector, and as always, a strong flow of remittance from overseas workers. This will be helped by the stabilization of inflation and declining unemployment rates. This all then helps drive an inclusive demand for digital services," Wang said.

Bain partner Bennett Aquino also noted the rapid adoption of digital platforms, the increasing penetration of digital finance by players like GCash and Maya, and how local businesses are capitalizing on this to go to digital.

FIERCEST REVENGE TRAVELERS

Aquino also noted that the Philippines had the highest growth in post-pandemic travel in the region. Since 2020, Filipinos using online platforms for travel bookings have risen 450 percent, he said.

"Officially, we are the region's fiercest revenge travelers," Aquino said.

He said 60 percent of Philippine outbound travel spending was in the Asia Pacific region, primarily Singapore and Thailand. The remaining 40 percent goes to Japan. Airlines are capitalizing on this increased demand, according to Aquino.

The digital financial services sector also continues to grow, led by payments. But the next big area for growth will come from lending and wealth services, according to Aquino.

Digital payments are expected to grow to $125 billion in gross transaction value this year led by G-Cash and Maya.

He said lending has significant growth potential, thanks to artificial intelligence and AI-powered credit scoring, which will enhance the accessibility and efficiency of loans and debt for SMEs and underbanked Filipinos. 

VIETNAM STILL MOST ATTRACTIVE FOR INVESTORS

Meanwhile, despite the Philippines outpacing its peers in the expansion of its digital economy, Vietnam remains the top of mind for investors in the region, according to Aquino.

He said that based on their survey of investors, 80 percent expect to increase funding in Vietnam from 2025 to 2030, while 60 percent expect to do so in the Philippines. Factors favoring Vietnam include its larger manufacturing sector, its proximity to China, which makes it a "good hotbed for opportunity."

But Aquino also said that 60 percent is still "a promising number." Many investors are looking at the Philippines to develop software, health tech and other services he said. Philippine startups need to take advantage of this, he said.

"The startup environment really needs to up its game when it comes to playing in sectors that these investors are interested in.

INFRA IS KEY

Aside from developing attractive startups, the Philippines also needs to continue developing its infrastructure.

Wang said the Philippines needs to get better connections, especially in the rural areas.

"The last mile logistics as well. I would say there are investments here, I think, there's many different kinds of investments that are needed," she said.

Aquino also said logistics are important, especially for e-commerce because while the platforms may be digital, the fulfillment centers and delivery systems are physical.

"If I were to be an advisor to both the private and public sector, I would focus on the things that are inherently solvable but also will take time. Again, physical infrastructure, last mile logistics, digital infrastructure, connectivity, cyber security, and trust. These are things that we do believe may be holding back some investors today, but if you solve that, that will open up a lot more interest."