SINGAPORE: Southeast Asia’s digital economy** **is set to exceed US$300 billion by the end of the year after seeing strong growth over the past decade, according to a new report by Google, Temasek, and Bain and Company.

The report also found that private artificial intelligence (AI) funding in Singapore surged 55 per cent from the second half of 2024 to the first half of 2025.

The three companies launched the 10th e-Conomy SEA report on Tuesday (Nov 11), and expanded its coverage from earlier reports to include Brunei, Cambodia, Laos and Myanmar for the first time.

It previously covered only Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

“Ten years ago, we put this bold number out there. We said that we would be a US$200 billion digital economy by 2025,” said Ms Sapna Chadha, vice president for Southeast Asia and South Asia frontier at Google.

That forecast for the region’s gross merchandise value – which refers to the value of all goods sold – was considered ambitious at the time, she said.

“The region didn’t just meet this goal. We’re really happy to show that it surpassed it, and it surpassed it three years ahead of schedule,” she added.

The report noted that the additional four countries accounted for about 2 per cent of gross merchandise value, and had been added to provide a “more holistic view of the region’s evolving digital economy”.

Revenue across the 10 countries is expected to reach US$135 billion as profitability accelerates.

For the purposes of the report, gross merchandise value included sales in e-commerce, food delivery, transport, online travel, and online media, while revenue included those sectors as well as digital financial services.

E-commerce is the biggest segment, and sales are expected to reach US$185 billion this year, while revenue is projected to hit US$41 billion.

This was driven by significant economies of scale for leading platforms in the region, as well as the rapid expansion of video commerce.

“Shoppertainment” fuelled the growth of video commerce, which is expected to account for 25 per cent of e-commerce sales, compared with less than 5 per cent in 2022.

Mr Florian Hoppe, a partner at Bain and Company, a global consultancy, said buyers want to engage with sellers.

“These creators, they put up 30 plus monthly videos, engage constantly, they need to be relatable,” he said.

Online travel was the next biggest segment of Southeast Asia’s growing gross merchandise value, with growth supported by high airfares and accommodation rates as well as the relaxation of visa schemes.

INVESTMENTS INTO AI

The report also found a cautious uptick in private funding in Southeast Asia, which grew around 15 per cent from a year ago to around US$8 billion.

More than US$2 billion of funding went to AI-related start-ups in the past year, said Mr Fock Wai Hoong, head of Southeast Asia at Temasek, Singapore’s state investment firm.

“While the majority of these AI companies are based in Singapore as its regional or global hub, we see the proliferation of AI usage across the broader region,” he said.

Singapore is home to nearly 500 active AI start-ups, out of almost 700 in the region.

As the leading regional AI hub, Singapore secured US$1.31 billion in private AI funding from the second half of 2024 to the first half of 2025.

Over the same period, Singapore received 55 per cent of all AI investments into the 10 Southeast Asian countries included in the report.

Singapore’s attractiveness and strength is also having a spillover effect, causing Southeast Asia to be “global magnet for AI infrastructure”, said Ms Chadha of Google.

Singapore is reaching its energy consumption ceiling, and cloud providers are turning their focus to neighbouring nations such as Malaysia.

The total capacity of data centres in the region is expected to grow by around 180 per cent, faster than the growth projected for the rest of the Asia-Pacific region.

In a separate briefing for the media, Mr Fock of Temasek said AI continues to be an area that the company will focus on.

“AI is a global investment thematic that is impossible to ignore,” he said, adding that the impact of AI on digital funding will continue to grow despite some caution around valuations at this stage.