Despite challenges, Southeast Asia's digital economy is poised to reach $368 billion by 2026, driven by AI innovations across various sectors.
SINGAPORE – Southeast Asia is on track for a remarkable expansion in its digital economy, projected to grow to approximately US$368 billion (S$470 billion) by the end of 2026. This represents a significant 17% increase compared to the estimated US$315 billion for 2025. This optimistic forecast comes from the latest e-Conomy SEA report published on October 21 by Google, Singapore's Temasek Holdings, and the consultancy firm Bain & Company.
A Diverse Region with Promising Prospects
The report evaluates the digital economic landscape across ten Southeast Asian countries: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. The assessment provides insights into the gross merchandise value (GMV) of various digital activities, such as e-commerce and transportation services.
Within this vibrant region, Singapore is expected to see its digital economy grow to US$31 billion by 2026, marking an 8% increase from the previous year. Key sectors propelling this growth include e-commerce, travel, online media, as well as food and delivery services.
Resilience Amid Global Challenges
Florian Hoppe, a partner at Bain & Company, expressed confidence in the resilience of Southeast Asia’s digital sector, despite current geopolitical and economic headwinds. He shared that the region's GDP is projected to grow between 4% and 5%, as highlighted in the International Monetary Fund's latest outlook. By 2026, ASEAN’s GDP is anticipated to hit 4.9%, surpassing the global average, which is predicted at 3.1% for the same period.
This robust economic performance can be partially attributed to strong investment trends across the region, according to Hoppe.
Artificial Intelligence Driving E-Commerce Growth
The e-commerce sector remains the largest component of Southeast Asia’s digital economy and is expected to reach US$226 billion by 2026, representing an 18% increase from US$191 billion in 2025. Artificial intelligence (AI) is playing a pivotal role in this growth by offering sellers innovative tools for enhancing consumer engagement.
For instance, AI technologies enable merchants to create dynamic product videos and tailor recommendations based on user preferences. A survey conducted among consumers in Indonesia, Malaysia, Singapore, Thailand, Vietnam, and the Philippines revealed that about 69% use AI for product comparisons. This significantly boosts conversion rates for sellers by 10% to 15%.
Growth in Online Travel and Media Sectors
The online travel sector is also booming, with an anticipated gross merchandise value of US$59 billion in 2026—a 10% rise from US$53 billion. The growth in travel is being supported by AI technology that aids in planning trips and bookings while also navigating rising airfare prices due to recent oil market fluctuations.
In the online media realm, contributions to the digital economy are expected to reach US$44 billion by 2026, a 22% increase from US$36 billion. The surge is attributed to the increasing efficacy of online advertising, driven by AI’s ability to target advertisements more precisely. Additionally, users are now more drawn to short-form video content that is quicker to produce due to advances in AI.
Transport and Delivery Services on the Rise
The transport booking and food delivery sectors are projected to accumulate a gross merchandise value of US$40 billion by 2026, marking a 15% increase from $35 billion in 2025. Enhanced customer retention strategies, along with more frequent orders from existing users, are fueling this upward trend. AI’s introduction to this sector—such as personalized suggestions based on past orders—is likely to enhance consumer spending further.
Additionally, AI voice assistants are being developed to simplify transport bookings, offering significant benefits for elderly users and those with disabilities.
Generative AI Adoption and Future Perspectives
A standout finding in the report is that generative AI usage has reached 243 million individuals, accounting for 58% of the working population in Southeast Asia. The swift adoption of this technology has occurred within three years, in contrast to the internet’s decade-long integration.
However, while initial adoption rates are promising, the report suggests that deeper utilization—reflected by greater engagement and use of AI capabilities—still needs to be achieved. Notably, private investment in AI infrastructure has surged, with US$16.3 billion allocated to data center developments in the first half of 2026, indicating strong future growth expectations for AI technologies in the region.
