Will digital financial services support Southeast Asian countries during recession?
Analysts of Robocash Group say that the region has approached this downturn in better shape. According to their estimates, Indonesia and the Philippines can achieve 2.2-2.8% of the GDP growth this year, Vietnam – over 4%.
These forecasts arise from an expected surge in consumption and investment activity that will be facilitated by deferred consumption and government stimulus. Other factors, such as a high share of youth, active use of the Internet, as well as the rapid development of financial technologies and e-commerce, have built and enhanced the infrastructure for digital payments and alternative lending.
Remarkably, digital innovation alone already accounted for nearly 30% of growth in per capita gross domestic product in Asia over the past two decades. In this regard, the segment of financial services, which has been increasing its share within the GDP structure at ever-growing rates yearly, has supported the local economies significantly.
As the data states, financial and insurance services took 4.3% in 2018 and 4.4% in 2019 within the GDP in Indonesia. Three months later, their share was 4.9%. Remarkably, the annual growth rates accelerated too: 4.2%, 6.6% and 10.7%, respectively. In Vietnam, the segment also proved its significance in the services sector, despite a decrease in the share and dynamics in the first quarter of 2020.
In 2018 and 2019, its share was 5.3%, while the growth rates were 8.2% and 8.7%, respectively. In Q1 2020, the segment took 3.7% increasing by 7.2% year-over-year. Meantime, financial services showed the highest weight within the GDP in the Philippines. It made up 8.4% in 2018 and 8.9% in 2019. As for dynamics, the increase was 7.2% and 10.4%, respectively.
The digital segment has made a solid contribution in this regard. While only 34% of people on average globally made mobile payments in 2019, SEA countries recorded higher usage: 61% in Vietnam, 47% in Indonesia, and 45% in the Philippines. At the same time, these figures have grown significantly since 2018, thus suggesting further increase recently. Moreover, according to the statistics of Robocash Group, the demand for small online loans last year grew by 154% in the Philippines and 171% in Indonesia. Altogether, these findings prove the favorable environment for fintech and digital commerce in the region.
The company expects that, with the mentioned factors, the economies of the Philippines, Vietnam, and Indonesia will keep growing this year. With the beginning of the recovery in the third quarter, the countries will restore their economies in 2021. Meanwhile, most of the developed and other emerging markets will deal with a deeper decline in the investment field and consumption. They will be able to regain their growth rates in 2-3 years the earliest.
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