South-east Asia’s digital economy is projected to reach US$368 billion by the end of 2026, marking a 17% increase from an estimated US$315 billion in 2025, according to a report released on October 21 by Google, Temasek, and Bain & Company. The growth is attributed largely to advancements and increased adoption of artificial intelligence (AI) across the region.
The report, covering 10 countries—Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam—measures the digital economy in gross merchandise value (GMV), which accounts for goods and services transacted on digital platforms such as e-commerce, travel booking, transport, and food delivery.
Singapore’s digital economy is expected to grow to US$31 billion in 2026, representing an 8% rise from the previous year. The region as a whole is experiencing growth across e-commerce, online travel, online media, and transport and food delivery services.
Florian Hoppe, a Bain partner, highlighted South-east Asia’s resilience amid geopolitical and macroeconomic challenges, citing regional GDP growth projected between 4% and 5%. This is supported by robust investment, with the International Monetary Fund forecasting ASEAN’s economic growth at 4.9% for 2026 and 4.7% for 2027, outpacing global projections of 3.1% and 3.4%, respectively.
E-commerce continues to dominate the digital economy, with its market expected to reach US$226 billion in 2026, a 48% increase from US$151 billion in 2025. AI tools are playing a significant role, enabling sellers to create engaging content like short product videos and offering consumers personalized product recommendations. A study covering six countries—Indonesia, Malaysia, Singapore, Thailand, Vietnam, and the Philippines—found that 69% of consumers use AI to compare products. Sellers report a 10% to 15% improvement in conversion rates due to AI implementation.
The online travel segment is anticipated to grow 10% to US$59 billion in 2026, driven by AI-enhanced planning and booking tools. Rising airfares, influenced by oil price shocks linked to Middle East conflicts in the first half of 2026, and higher accommodation rates—particularly for luxury properties—further contribute to this growth.
Online media, encompassing digital advertising, gaming, and streaming subscriptions, is forecasted to contribute US$44 billion, a 22% increase from 2025. AI has notably improved ad targeting and campaign efficiency, while also enabling faster content production, especially for short-form videos. Nonetheless, major streaming platforms are cautious about AI-generated content, maintaining a focus on premium, long-form programming to sustain viewer engagement and subscriber loyalty. AI’s most substantial impact in this sector lies in personalizing and localizing content to enhance consumer discovery.
Transport booking and food delivery platforms are expected to reach US$40 billion in GMV by 2026, up 15% from 2025. New customer acquisition and increased frequency of orders support this growth, with AI tools offering personalized suggestions based on users’ past behavior.
The report also highlights that generative AI adoption has rapidly reached 243 million people—58% of the region’s working population—within three years, a much faster pace than the internet’s adoption timeline. However, deeper usage remains limited. Token usage, a metric assessing AI interaction volume, stands at five million tokens per person in six key countries, compared to 60 million in the United States and 14 million in Europe.
Private investment in AI-related infrastructure such as data centers saw a sharp increase, totaling US$6.3 billion in the first half of 2026, a sixteenfold rise from US$1 billion in the same period a year earlier, underscoring the region’s intensifying focus on digital economy growth.