The digital economy in Vietnam is forecast to grow 20% a year between 2023 and 2025, as Southeast Asia's internet economy is set to expand 11% year-on-year in 2023, a slowdown from 20% growth in 2022.

An annual industry report was published on Wednesday by Google, Singapore state investor Temasek Holdings, and global business consultant Bain & Company, which also said the region's internet economy is expected to reach $295 billion by 2025, a fall from a prior forecast of $330 billion.

"Digital economy sectors are showing positive growth trajectories, with travel and transport on track to exceed pre-pandemic levels by 2024," it was revealed in a joint statement.

The cut in the growth forecast is predominantly down to a long-term objective shift and post-pandemic stabilisation and should now remain steady towards 2025, according to Partner and Head of Vector in Asia-Pacific, Bain & Company, Florian Hoppe.

The 11-country region is home to half a billion people, a mainly young population with widespread smartphone usage, meaning it is one of the fastest-growing internet markets in the world, Reuters reports.

In regard to Vietnam, the country's digital economy is set to expand 20% a year between now and 2025 and is on course to reach around $45 billion by 2025, the fastest in Southeast Asia along with the Philippines, as per the report.

"Digital payment continues to grow in Vietnam driven by strong support from the government, investment from commercial banks, and the widespread popularity of QR codes," the report added.

This trend is forecast to accelerate as Vietnam's central bank encourages cashless payments in rural areas, it went on to say.

Furthermore, covering Vietnam, Indonesia, Thailand, Singapore, Malaysia, and the Philippines, the report said private funding for sectors related to the digital economy has fallen to 2017 levels from all-time highs in 2021.

"To exit this funding winter, Southeast Asia's digital businesses need to prove that quality deals with visible exit pathways are readily available," said the report.