Southeast Asia’s Grab, Sea and GoTo face slowest internet growth in the region since 2017 as e-commerce expansion decelerates: report

The biggest category, e-commerce, is set to reach only US$186 billion in 2025, rather than the US$211 billion the researchers estimated previously.

Consumers in the region of more than 650 million people are curbing spending to cope with elevated inflation and interest rates.

The region’s internet economy is now on track to reach US$295 billion by 2025, according to the report, down from a previous forecast of US$330 billion.

Even as more people in Southeast Asia come online, a bulk of the region’s spending still comes from relatively wealthier consumers in major cities.

The top 30 per cent high-value users account for more than 70 per cent of digital economy transaction values, signalling internet companies are struggling to attract potential customers in more remote regions, the report said.

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Still, competition in the region is intensifying.

Private funding of companies in Southeast Asia has dropped to its lowest level in six years, slowing sharply from pandemic highs as investors become more choosy and capital becomes more expensive. The number of deals involving tech companies in the region shrank by more than half to 564 in the first half of 2023 from the year-earlier period, according to the report.

Investors in the region, many of whom started funds in the middle of the last decade, are facing mounting pressure to deliver returns in a challenging market for public listings. Funds in Southeast Asia started in the past five to seven years have only returned 4 per cent on average, compared with about 50 per cent for China and 40 per cent for the United States, according to the study.