Pandemics like COVID-19 have spurred countries to build more sustainable economies by enhancing social assistance, and competitiveness, and supporting small businesses. The pandemic disproportionately impacted women, youth, the poor, and other vulnerable groups in Southeast Asia, with staggering economic and social impacts.
As a result of recurring waves of Covid-19, economies in Southeast Asia will recover at a much slower pace than previously thought. According to the Asian Development Bank (ADB), Southeast Asia’s GDP is expected to grow by 5.1% by 2022, with a worst-case scenario for the growth of -0.8 percentage points.
Market players affected by the pandemic
The global manufacturing supply chain is heavily reliant on Southeast Asia. Covid-19 is impacting these economies in multiple ways. Southeast Asian countries that have been historically open to trade and investment, as well as tourism, have been badly affected by the global pandemic.
Whether it’s palm oil and metals from Indonesia, manufactured components from Malaysia, Vietnam, and the Philippines, or textiles from Cambodia, the exports from these countries have fallen sharply. The widespread lockdown and travel bans have resulted in a sudden economic drop and export. Take Indonesia as an example, where coal and oil make up nearly a quarter of exports, and Malaysia, where oil and gas account for 16% of exports. Semiconductor and daily necessities like coffee and clothing supplies have been severely restricted and affected.
Digital growth in Southeast Asia
The internet economy of Southeast Asia cooled during the pandemic, but it could rebound rapidly and triple to more than $300 billion by 2025. The value of transactions in key areas such as e-commerce, travel, digital media, transport, and food has seen an immersive growth that has helped in the revival of the region’s economy. In order for the region to reach its full potential, several areas must be improved, digital infrastructure, new customer development, information security, and effective digital policy should be on top priority.
Mobile wallets and mobile banking also play a big role. With almost 73% of the population estimated to be unbanked, it is expected to see a growth in digital financial inclusion as online payment platforms allow customers without bank accounts to make purchases online. The value of online transactions from online commerce to food delivery is targeted to reach the US $360 billion by 2025.
What 2022 will bring to the economy?
An estimated 70 % of people are turned to online shopping which makes the number reach 380 million by 2026. As people are more convenient to use online platforms for purchases Fintech services such as buy now pay later, digital wallets, and cryptocurrency would see a rise in 2022. Along with the digitalization, e-commerce, electronics industry, Information technology sectors, and service sectors would play a big role in taking the economy to its revival. The revenue of mobile games is expected to increase by over 90% roughly from 2020 until 2023. This ratio is far above the global market’s average raising rate.
The southeast Asian region has been under great pressure to bring its economy to a normal level. The region has continuously made efforts to bring production closer to home, increasing the domestic production capabilities, also reducing its dependence on sources that would be risky for the economy by shifting to regional supply chains. Southeast Asia’s rapid digitalization during the pandemic demonstrates the region’s digital economy’s enormous opportunities, according to the report. As new verticals, industries, and products emerge in the next 10 years, the region will continue to be a growth market.
As a result of the widespread adoption of new and advanced technologies, the region will leapfrog many regional trade blocs in terms of customer satisfaction and service delivery. Southeast Asian countries are on the verge of digitalization growth and the transformation wave would be a great impact on the economy in the future.
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