SINGAPORE - Singapore's Internet economy was hurt by the Covid-19 pandemic this year, even as the crisis accelerated all things digital and fuelled an e-commerce boom.
The nation's Internet economy - which refers to business conducted online - shrank by 24 per cent to US$9 billion (S$12.1 billion) in gross merchandise value (GMV) this year as the online travel sector was affected by lockdowns and travel restrictions, according to a report by Google, Temasek and consulting firm Bain & Company.
Despite the contraction, Singapore's Internet economy is on track to reach US$22 billion in GMV by 2025 as sectors severely disrupted by the pandemic are expected to rebound.
Online travel - Singapore's largest digital sector last year - slumped by 70 per cent this year to US$2 billion in GMV.
The annual South-east Asia e-Conomy study, first published in 2016 and whose results for this year were released on Tuesday (Nov 10), covers Singapore, Malaysia, the Philippines, Thailand, Vietnam and Indonesia.
It looks at trends and data across seven Internet economy sectors: e-commerce, transport and food, online travel, online media and digital financial services, and two newly added sectors - health technology (healthtech) and education technology (edtech).
Although online travel business in Singapore was hard hit, the coronavirus pandemic boosted local tourism slightly, with the country experiencing the biggest spike in online searches for staycations among all South-east Asian countries, after the nation's circuit breaker period.
Excluding travel, Singapore's Internet economy grew 20 per cent to US$7.6 billion.
Its e-commerce sector swelled by 87 per cent to US$4 billion in GMV as more people stayed home and made online purchases this year, although this was not large enough to offset the decline in travel.
Mr Aadarsh Baijal, partner and head of digital practice in South-east Asia at Bain & Company, said Singapore's e-commerce segment has overtaken online travel and is expected to grow over the next few years to be the largest sector here and in a few other South-east Asian markets.
"Travel is expected to recover given the type of market Singapore is and the extent of international travel that is likely to come back. But in the next few years, it will remain muted, so sectors like e-commerce will become larger," he said.
The study found that Singapore Internet users are spending more time online. The average number of hours increased from 3.6 hours per day before the pandemic to 4.5 hours during the circuit breaker period and 4.1 hours now.
Among the sectors covered in the report, nearly a third (30 per cent) of all digital service consumers in Singapore were new to the service. More than nine in 10 of new consumers are expected to continue using at least one digital service even after the pandemic ends.
Meanwhile, the transport and food sector shrunk 26 per cent to US$2 billion this year due to work-from-home arrangements and reduced confidence in shared transportation.
The online media segment grew 24 per cent to US$1.8 billion, as people consumed more videos, games and other digital media products while staying at home.
As for digital financial services, Singapore saw a 17 per cent increase in monthly active users on mobile banking apps since the start of this year.
Its online investment sector also grew. The volume of queries on robo-advisers and online wealth management platforms almost doubled in the first eight months of this year, compared with the same period last year.
The total value of investments in Singapore's Internet economy rose to US$2.5 billion over 325 deals in the first half of the year, up from US$1.8 billion in the second half of last year.
The report noted that Singapore continues to be a regional hub for various digital economy sectors such as fintech due to its strong start-up ecosystem. The city-state houses the regional headquarters of e-commerce unicorns such as Lazada and Sea, which owns Shopee.
Ms Stephanie Davis, Google's vice-president for South-east Asia, said: "South-east Asia's growing digital economy is creating demand for a digitally skilled workforce. Singapore has led the way in growing its talent pool through a government and business ecosystem committed to skilling Singaporeans for the opportunities that lie ahead."
On the whole, South-east Asia's Internet economy is set to exceed US$300 billion in GMV by 2025, fuelled by e-commerce and online media consumption, said the report.
The nascent sectors of health technology (healthtech) and education technology (edtech) also played crucial roles in countries across the region, including Singapore.
The number of users on telemedicine platforms grew by four times, and these platforms retained users even after lockdowns ended.
Meanwhile, the number of students who installed the top five edtech apps in South-east Asia increased by more than three times.
Mr Rohit Sipahimalani, Temasek chief investment strategist and head of South-east Asia, said: "Both healthtech and edtech have allowed people to access critical services during lockdowns. For example, Singapore has always had digital learning platforms for schools, but this became really valuable during the pandemic as they allowed teachers to have customised interactions with their students."