AI boosts Southeast Asia's digital economy: online spending expected to reach $368 billion this year, though growth rate slightly slows

According to Zhichong Caijing APP, a group of researchers stated that artificial intelligence is helping Southeast Asia's digital economy achieve robust growth amid rising prices and fluctuating demand. A report from Google, Temasek Holdings, and Bain & Company shows that online consumption in the region will grow by around 17% this year to $368 billion, a slight slowdown compared to last year. Despite sluggish economic growth and high inflation suppressing consumer demand across sectors from e-commerce to tourism, digital enterprises in the region have leveraged AI to reach consumers more precisely and stimulate spending.

This region, home to about 700 million people, is a fiercely contested market for e-commerce giants such as Alibaba (BABA.US) and Shopee parent company Sea (SE.US), ride-hailing and food delivery businesses like Grab Holdings (GRAB.US) and GoTo Group, as well as online travel agencies including Trip.com Group and Traveloka. To face intense competition, these companies are betting on growth in internet usage and consumer spending to drive up their revenues.

However, elevated inflation and interest rates, along with energy price volatility stemming from geopolitical shocks, are eroding consumers' purchasing power. Concerns about any possible slowdown in global AI advancement, which could reduce demand for Southeast Asia's key hardware industries, are also further dampening expectations for the region's economy.

AI is helping digital enterprises partially offset such risks. According to the report, advertising revenues for online media are expected to see the strongest growth in at least five years, fueled by AI-recommended content; about 62% of Southeast Asian consumers now have more confidence in making critical decisions using AI than they did a year ago.

AI is also driving a recovery in technology investment in the region. The report shows that in the first half of this year, private sector financing in the area soared more than fivefold compared to the same period last year. Large-scale deals to build data centers, combined with demand for AI applications across industries from software to digital financial services, have contributed to this investment growth.

Many of these deals focused on companies set to benefit from the global AI boom, such as data center operators; firms like STT GDC and DayOne Data Centers accounted for the vast majority of the financing.