As the digital economy in Southeast Asia (SEA) expands rapidly, Indonesia and the Philippines emerge as significant players. In 2024, both countries witnessed impressive growth driven by advancements in e-commerce, digital financial services, and online travel.

Despite shared similarities, the two countries’ unique market dynamics, regulatory environments, and growth trajectories highlight the distinctive paths each country is taking toward digital transformation.

Based on information revealed in the SEA e-Conomy Report 2024 by Google, Temasek, and Bain & Co., this article looks at how the digital economy in Indonesia and the Philippines fare in 2024. Outlining their respective strengths and challenges, this might serve as a handy guidance for entrepreneurs looking to seize opportunities in the market.

Overall market size and growth

Indonesia’s digital economy remains the largest in SEA, reaching a Gross Merchandise Value (GMV) of US$90 billion in 2024, a 13 per cent increase from the previous year. This growth is propelled primarily by robust e-commerce expansion, underpinned by the rising popularity of video commerce. The e-commerce sector reached a GMV of US$65 billion, indicating a vast and continually growing online marketplace.

In contrast, the Philippines’ digital economy, though smaller in absolute terms, is growing at a faster rate. A 19 percent increase brought its GMV to US$31 billion in 2024.

Also Read: Digital banking in Indonesia: Growing importance and future trends

The e-commerce sector in the Philippines, similarly driven by video commerce, recorded a 23 per cent growth to reach US$21 billion. While the Philippines’ digital economy is smaller than Indonesia’s, its growth rate underscores its potential as an emerging digital market in SEA.

Consumer trends in e-commerce

As discussed, both countries saw notable growth in e-commerce, with video commerce transforming consumer experiences by making shopping more interactive.

In Indonesia, this trend has led major e-commerce players to refine their strategies, leveraging social media and content-driven platforms to enhance engagement. Furthermore, the Indonesian market has grown increasingly competitive, with acquisitions by leading social media companies and local players intensifying the competition, encouraging brands to adopt innovative customer engagement methods.

Similarly, video commerce resonates strongly with Filipino consumers, driving engagement and sales. However, the Philippines has a unique advantage in terms of language and localisation. Filipino consumers and content creators demonstrate a clear preference for local language content, which has influenced e-commerce strategies and led to a more culturally tailored approach to customer engagement.

Brands that leverage this localised approach are better positioned to capture the Philippine market, creating opportunities for businesses that understand the importance of language and cultural nuances.

Digital financial services and regulatory landscape

Digital financial services (DFS) have become crucial in both markets, though each country has approached this growth differently.

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Indonesia’s DFS sector experienced notable growth in digital payments and lending, supported by government initiatives to encourage a cashless society. Launching a nationwide digital wallet program exemplifies the government’s efforts to expand digital finance nationwide.

Despite regulatory oversight, which has increased to ensure security and stability, Indonesia’s DFS market remains dynamic and is anticipated to grow as financial inclusion efforts expand beyond major cities.

The Philippines, on the other hand, saw a significant rise in digital payments, with volumes reaching US$125 billion in 2024. Aiming to level the playing field between local and foreign providers, the government has introduced policies such as the Internet Transactions Act, mandating registration for online businesses and a value-added tax on non-resident digital service providers.

These regulatory changes, while complex, aim to enhance security and fairness within the digital financial landscape, promoting a safer and more competitive environment for digital services.

Investment in digital inclusion

Despite the promising growth, infrastructure remains a critical factor in digital economy growth in the two countries.

In Indonesia, digital infrastructure investments have focused on expanding access beyond major urban centres. Major tech companies are venturing into smaller cities to tap into new consumer markets and leverage regional talent. This geographic expansion is expected to play a significant role in Indonesia’s continued digital growth in the years ahead.

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Recognising similar needs, the Philippines has also prioritised connectivity, particularly in underserved areas. The Philippine Digital Infrastructure Project, with an investment of US$288 million, is a testament to the government’s commitment to bridging the digital divide.

Improved connectivity is crucial for expanding access to digital services and fostering regional economic growth, allowing smaller communities to benefit from the opportunities presented by the digital economy.

Towards the future

Looking forward, both countries face opportunities and challenges in sustaining their digital economy growth.

In Indonesia, AI is gaining traction, with applications across e-commerce, finance, and other sectors expected to increase significantly in 2025. AI adoption, particularly in high-interest regions such as East Kalimantan, Jakarta, and Riau Islands, could enhance operational efficiency and customer engagement across industries.

In the Philippines, the resurgence in travel and tourism spending is notable, with the online travel sector growing by 13 per cent to reach US$3 billion in 2024.

As post-pandemic travel demand continues to rise, online travel platforms are expected to benefit. Furthermore, continued investments in digital infrastructure and a proactive approach to regulation suggest that the Philippines is laying a strong foundation for sustainable growth in the digital sector.

At the end of the day

Indonesia and the Philippines are both making significant strides in the digital economy, each with its own strengths.

Also Read: Echelon Philippines 2024: Why the Philippines is the next big tech hub

Indonesia’s larger market size and the continued expansion of digital finance and e-commerce reflect its position as a regional digital powerhouse. Meanwhile, the Philippines, though at a smaller scale, is exhibiting robust growth, driven by rapid e-commerce adoption, localised content strategies, and regulatory advancements aimed at creating a fairer digital economy.

As both countries navigate challenges around regulatory oversight, infrastructure, and digital inclusivity, their trajectories will likely serve as benchmarks for emerging digital markets across Southeast Asia.

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