AI to spur Southeast Asia's digital economy to $368 billion, shows study
By Gabrielle Ng
Artificial intelligence (AI) is helping Southeast Asia’s digital economy grow strongly, even as prices rise and demand weakens, according to a group of researchers.
Online spending across the region is expected to grow by about 17% this year, reaching $368 billion, according to a report by Google, Temasek Holdings Pte and Bain & Co. This is a slightly slower rate of growth than last year. Slow economic growth and high inflation are hurting consumer demand in areas such as online shopping and travel. But digital businesses in the region are using AI to reach the right customers and encourage them to spend more.
Southeast Asia has about 700 million people and is a major market for online shopping companies such as Alibaba Group Holding Ltd. and Sea Ltd., the parent company of Shopee. It is also a key market for ride-hailing and food-delivery companies such as Grab Holdings Ltd. and GoTo Group, as well as online travel agencies such as Trip.com Group Ltd. and Traveloka. To compete in this crowded market, these companies are counting on more people using the internet and spending money to help their businesses grow.
High inflation and interest rates, along with sudden increases in energy prices caused by geopolitical events, are reducing how much consumers can afford to spend. There are also concerns that a slowdown in the global push to develop AI could reduce demand for products made by Southeast Asia’s important hardware industry. These risks are lowering expectations for the region’s economy.
AI is helping digital businesses make up for some of these risks. Online media is expected to grow at its fastest rate in at least five years, helped by rising advertising revenue from AI-powered content promotion, the report said. The report also found that about 62% of Southeast Asian consumers are now more confident about using AI to make important decisions than they were last year.
AI is also helping investment in the region’s technology sector recover. Funding for private companies in Southeast Asia rose to more than five times its level in the first half of this year compared with the same period last year, according to the report. Large deals to build data centers helped drive this increase. So did growing demand for AI applications in industries ranging from software to digital financial services.
Many of these deals involved companies expected to benefit from the worldwide growth of AI, including data center operators. Companies such as STT GDC and DayOne Data Centers Ltd. received a large share of the funding.