The Philippine digital economy is expected to maintain strong growth in 2025, with analysts projecting a 15% to 20% expansion, building on gains from previous years.

E-commerce, fintech, and digital infrastructure development will be the key drivers of the country’s digital economy, Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera told BusinessWorld.

In 2023, the digital economy contributed 8.4% to the Philippines’ GDP, equating to approximately US$35.4 billion. It represents a 7.7% growth from the previous year.

While the share of the digital economy in the overall GDP experienced a slight decrease from 8.6% in 2022 to 8.4% in 2023, the gross value added by the sector still demonstrated a significant upward trend.

Looking ahead, the digital economy in the Philippines is projected to reach a gross merchandise value between $80 billion and $150 billion by the year 2030.

“We are hopeful that with the positive impact of relevant trade pacts and regional harmonisation efforts currently being negotiated in ASEAN, this trend will only further accelerate,” said Joo-ok Lee, head of Regional Agenda, Asia-Pacific at the World Economic Forum.

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Key drivers of the Philippine digital economy

The e-commerce sector has been a consistent primary driver of the Philippines’ digital economy, with online retail increasingly becoming a fundamental aspect of consumer behaviour.

Sales within the Philippine e-commerce market reached $17 billion in 2021 and are projected to climb to $24 billion by 2025. This market is expected to maintain a compound annual growth rate of 16.8% from 2024 to 2028.

The COVID crisis also significantly accelerated the adoption of e-commerce, a trend likely to persist in 2025 due to the convenience it offers, a broader selection of products, and competitive pricing.

The development of more affordable logistics solutions in rural areas is also expected to bolster e-commerce growth by enabling access to a wider range of consumers across the country.

The fintech sector is also playing a crucial role, particularly through the expansion of digital wallets and micro-lending platforms that cater to the significant underbanked population and thereby stimulate growth.

In 2024, digital payment transactions accounted for 52.8% of the total monthly retail payments, surpassing the central bank’s target.

The Buy Now, Pay Later (BNPL) market is also gearing up for substantial growth with a projected increase of 14.6% in 2025, reaching a value of $3.21 billion.

The considerable number of individuals in the Philippines who lack access to traditional banking services presents a massive opportunity for fintech solutions that can offer accessible and convenient financial services via digital platforms.

The Bangko Sentral ng Pilipinas (BSP) intends to issue up to four new digital bank licenses in 2025, demonstrating a commitment to enhancing financial inclusion across the nation.

Advancements in digital infrastructure, including the development of data centres and the expansion of 5G connectivity, are also essential drivers of the digital economy.

In 2024, President Ferdinand Marcos Jr. approved the Philippine Digital Infrastructure Project (PDIP), a $288 million initiative aimed at improving broadband connectivity throughout the country.

The government is actively engaged in projects to complete the national fibre backbone and establish a greater number of free Wi-Fi access points.

Furthermore, the increasing adoption of artificial intelligence across sectors is set to contribute to the growth of the digital economy.

The AI market in the Philippines is projected to reach $772.1 million in 2024, with an anticipated annual growth rate of nearly 29%, reaching $3.5 billion by 2030.

The Philippines witnessed a surge in digital payments in 2024, likely to continue into 2025, largely driven by the increased adoption of e-wallets.

The ongoing expansion of e-commerce services will further propel the growth of digital payments as transactions between consumers and merchants increase.

Moreover, spending related to the midterm elections this year is anticipated to contribute to the digital economy, particularly through investments in online campaign strategies.

Government initiatives fostering growth

The Philippine government has implemented several key initiatives and policies to support the growth of the digital economy.

The Philippine Development Plan (PDP) 2023-2028 identifies digital transformation as a fundamental theme, with the goal of enhancing the Philippines’ global competitiveness.

Meanwhile, the PDIP – with a budget of $288 million – aims to significantly improve broadband connectivity and bolster cybersecurity across the nation.

President Marcos has directed all government agencies to digitalise essential public services. This includes the development and implementation of the eGov PHSuper App.

The National Broadband Plan (NBP) is an ongoing effort to establish a robust digital infrastructure backbone throughout the country, with the continued rollout of fibre-optic and satellite connectivity to reach even remote areas.

At the same time, the Free Wi-Fi for All project continues to expand internet access in underserved communities across the Philippines.

Other initiatives are also under way. Launched in 2021, the National Artificial Intelligence Roadmap aims to position the Philippines as an AI hub within the ASEAN region, which led to the establishment of the Center for Artificial Intelligence Research in 2024.

Meanwhile, the National Cybersecurity Plan 2024-2028 outlines strategies and programmes designed to protect the country’s cyberspace, enhance the skills of the cybersecurity workforce, and strengthen the relevant policy framework.

Furthermore, the Korean-Philippine Economic Innovation Partnership Program (EIPP) represents a collaboration with South Korea to advance digital transformation, encompassing initiatives such as the National Communications Satellite Roadmap and the Philippine E-Government Master Plan.

The government is also expanding its Tech4ED Centers, which provide communities with access to digital literacy programmes, livelihood training, and online government services.

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Potential challenges and obstacles

Despite the positive outlook, several challenges could potentially hinder the sustained growth of the Philippine digital economy in 2025.

With nearly 40% of the population lacking access to reliable internet services, the digital divide remains an obstacle.

Notably, e-commerce activity is still heavily concentrated in Metro Manila, accounting for 78% of the total.

The increasing sophistication of cyberattacks also poses a persistent threat to the growing digital infrastructure and security of online transactions.

Limited infrastructure and resources for the development and deployment of AI technologies could also impede progress in this crucial area.

Moreover, there is a noted shortage of skilled professionals in key areas such as AI and cybersecurity. And so this creates a talent gap that needs to be addressed.

The rapid adoption of AI also presents potential challenges related to workforce displacement and ethical considerations, requiring careful planning and mitigation strategies.

While progress is being made, financial inclusion remains a challenge. A sizable portion of the bankable population is still unbanked or underbanked.

The evolving regulatory landscape, particularly in areas such as e-commerce and AI, necessitates the development of clear and adaptive frameworks to foster innovation while ensuring consumer protection and fair competition.

A resilient and expanding digital economy

The Philippine digital economy is well-positioned for continued and significant expansion in 2025, driven by the increasing prevalence of e-commerce, the dynamism of the fintech sector, advancements in digital infrastructure, and the transformative potential of AI.

Government initiatives and policies are crucial in establishing an enabling environment for this growth, marked by substantial investments in infrastructure and a strong emphasis on digital inclusion.

However, addressing persistent challenges such as the digital divide, the ongoing threat of cyberattacks, the need for a skilled digital workforce, and ensuring comprehensive financial inclusion for all Filipinos will be vital for sustaining this growth trajectory and ensuring its benefits are widely distributed.

Tackling these potential obstacles and leveraging the identified growth drivers will enable the Philippine digital economy to be on a promising path to achieve its ambitious objectives for 2025 and beyond.