South-east Asia’s digital economy to hit US$368b in 2026, up 17% as AI uplifts growth

SINGAPORE - Despite geopolitical and macroeconomic challenges, South-east Asia’s digital economy is expected to hit US$368 billion (S$470 billion) by the end of 2026.

This is forecast to be a 17% increase from 2025’s US$315 billion, as artificial intelligence uplifts growth, according to a report released on Oct 21 by tech giant Google, Singapore’s investment company Temasek and consultancy Bain & Company.

The report covers 10 countries in the region: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

It measures the digital economy and its various components in gross merchandise value. It is calculated as the value of goods and services sold on various platforms, such as e-commerce and transport booking platforms.

The report said that strong growth was seen across e-commerce, online travel, online media, as well as transport and food delivery.

Florian Hoppe, a partner at Bain, said that South-east Asia’s digital economy has been resilient, with gross domestic product growth rates expected to be between 4 and 5 per cent, despite macroeconomic challenges.

“GDP has held up remarkably well, and that has been linked partially also to the fact that investment has been very strong,” he said at a media conference.

In the International Monetary Fund’s October economic forecast, ASEAN’s GDP growth is expected to reach 4.9 per cent in 2026 and 4.7 per cent in 2027. This is higher than global growth, which is forecasted to come in at 3.1 per cent in 2026 and 3.4 per cent in 2027.

Hoppe said that AI heavily boosted e-commerce, which still holds the largest share of the digital market.

The region’s e-commerce market is slated to hit US$226 billion, an 18% increase over 2025’s US$191 billion, according to the report.

Hoppe said that there are now many AI tools available to sellers on e-commerce platforms, such as for creating short videos about their products that help shoppers make purchases. Customers are also getting AI recommendations for products to buy.

The report also found that a significant number of shoppers are using AI. For example, in a smaller study of six countries in the region - Indonesia, Malaysia, Singapore, Thailand, Vietnam and the Philippines - 69 per cent of consumers use AI to compare products.

With the AI tools available, sellers are seeing a 10 to 15 per cent conversion uplift, said Hoppe.

For online travel, its gross merchandise value - measured by purchases for flights, accommodations and holiday rentals - is predicted to reach US$59 billion in 2026, up from US$53 billion a year ago, a 10% increase.

This growth was facilitated by, among other things, AI helping customers with discovering travel destinations and planning their travels, as well as helping travellers with bookings and adjusting their travel itineraries.

Online media - which covers online advertisements, spending in games, as well as streaming subscriptions for video and music - is expected to contribute US$44 billion to the region’s digital economy in 2026, up 22% from 2025’s US$36 billion.

Meanwhile, the gross merchandise value for transport bookings and food delivery is slated to reach US$40 billion by the end of this year, up 15% from US$35 billion in 2025.