Determinants of Government Debt in ASEAN-5 Nations: An ARDL Analysis of Economic Factors

Abstract

In the context of the global health crisis and economic downturn, ASEAN nations experienced a significant rise in public debt, highlighting the need to examine key economic determinants for sustainable debt management. This study investigates the impact of budget balance, real interest rate, current account balance, and GDP growth on public debt in ASEAN-5 countries (Indonesia, Malaysia, the Philippines, Singapore, and Thailand) from 1990 to 2021. Using the ARDL model, the findings suggest that, except for Indonesia and Singapore, budget balance has a negative correlation with public debt in both the short and long run, while real interest rates exhibit a significant positive long-run relationship across all countries. The current account balance shows a significant positive relationship with public debt in Indonesia and the Philippines, whereas GDP growth reveals a positive long-run impact only in Singapore, with other countries showing a negative impact. In the short run, budget balance and interest rates have more immediate effects, while GDP growth and current account balances show delayed impacts, becoming more significant in the long run. Policy implications suggest that maintaining budget discipline and managing interest rates are key strategies for controlling debt, though country-specific approaches are necessary given the mixed effects of GDP growth and current account balances. The study acknowledges limitations such as data gaps and the exclusion of variables like inflation and exchange rates, which may affect the generalizability of the results across different economic conditions.