CAN THO UNIVERSITY
SCHOOL OF ECONOMICS
OOO
Course: KT308H
INTERNATIONAL ECONOMIC RELATION
Individual exercise
FACTORS INFLUENCING ECONOMIC
GROWTH IN ASEAN COUNTRIES
Conducted by: Truong Luu Diem Quynh
Can Tho, 10/2023
TABLE OF CONTENT
1. INTRODUCTION ...................................................................................................... 3
2. METHODOLOGY ..................................................................................................... 4
2.1.
Scope of analysis .................................................................................................... 4
2.2.
Variable description and methodology................................................................... 4
3. DESCRIPTIVE STATISTICS ................................................................................... 7
REFERENCE................................................................................................................... 10
2
1. INTRODUCTION
The economic growth and development of the ASEAN (Association of Southeast
Asian Nations) countries have emerged as a compelling narrative in the global economic
landscape. In recent years, these nations have made remarkable progress, transforming
their economies and societies at an unprecedented pace with the GDP growth rate got
improved year by year, with the participation in the WTO, the ASEAN countries are able
to boost their economic growth and development even stronger therefore offering them to
catch up with the global economy’s developing pace and integrate further into the global
economy for more effectieve collaboration progress in the future. Generally, the economic
growth of the ASEAN countries is positively influenced by low inflation, young and
skilled labor force, high volume of foreign direct investment inflow, and abundant natural
resources, etc. (Banda, 2015; Auty, 2003; Andrés and Hernado, 2014). Hence, this report
will cover the factors influencing economic growth of the ASEAN countries from 2011 to
2020 to have a overall perspective of the current trend of the region.
3
2. METHODOLOGY
2.1.
Scope of analysis
In order to cover the factors influencing economic growth in ASEAN countries, this
report focuses on 9 independent variables (exchange rate, foreign direct investment,
inflation, political stability, labor force size, export of goods and services, national income,
manufacturing, government expenditure, and population aging) influencing GDP growth
(as proxy for economic growth) of 10 ASEAN countries hence evaluating the current trend
in the region in the period 2011- 2020.
Therefore, research scope of this report is showed as following:
The space scope of this report involves 10 ASEAN countries (Brunei, Cambodia,
Indonesia, Laos, Malaysia, Myanmar, The Phillipines, Singapore, Thailand, and Vietnam)
The time scope of this report is the 10 years from 2011 to 2020.
The data is mainly collected from World Bank and International Monetary Fund
(IMF). However, in terms of missing data, which is inevitable, the author choose to replace
the missing data using the mean or median value of that variable in a period. Specifically,
in case there is only one missing value in the research period, the author will replace the
missing data using the mean value of that variable in the two nearest years. This method
aims to ensure the balance and practicality of the data direction variability in the period.
Otherwise, in case the missing value is continuous in a few years, the author would use the
mean value to fill in the missing blank.
Ultimately, the data will be gathered as panel data with total 100 observations
processed by STATA 16.
2.2.
Variable description and methodology
Table 2.1. below shows description and measurement methods of dependent variable
anf 10 independent variable.
Table 2.1. The summary of data description and measurement method
Variable
Explaination
Measurement methods
Data
Measurement
basis
is the annual percentage growth
rate of GDP at market prices
based on constant local currency.
Aggregates are based on
World
bank
World bank (2023)
Dependent variable
GDP
GDP growth
annually (%)
4
constant 2015 prices, expressed
in U.S. dollars
Independent variable
FDI
FDI net inflows
MNF
Manufacturing
growth rate
EXR
Exchange rate
LBF
NIC
Labor force
participation rate
National income
per capita
GFE
Government
expenditure
EXP
Export value of
goods and
services
Is the direct investment equity
flows in the reporting economy
which is the sum of equity
capital,
reinvestment
of
earnings, and other capital
flowing in a country, expressed
in million U.D. dollars
Annual
growth
rate
for
manufacturing value added
based on constant local currency.
Aggregates are based on
constant 2015 prices, expressed
in U.S. dollars.
Is the average rate in a period of
the proportion between national
currency per U.S. dollar
Labor force participation rate is
the proportion of the population
ages 15 and older that is
economically active: all people
who supply labor for the
production of goods and services
during a specified period,
expressed in percentage
is Gross national income minus
consumption of fixed capital
and natural resources depletion
devided for the total population
Is
the
proportion
of
governmental spending for
purchases of goods and services,
as well as national defense and
security of total GDP, expressed
in percentage
Is the total value of all goods and
services exported to the world
including
the
value
of
merchandise, freight, insurance,
transport,
travel,
royalties,
5
World
bank
World bank (2023)
World
bank
World bank (2023)
IMF
IMF (2023)
World
bank
World bank (2023)
World
bank
World bank (2023)
World
bank
World bank (2023)
World
bank
World bank (2023)
license fees, and other services,
expressed in million U.S. dollars
INF
PSA
AGE
Inflation as measured by the
consumer price index reflects the
annual percentage change in the
Inflation rate
cost to the average consumer of
acquiring a basket of goods and
services
Political Stability and Absence
of Violence/Terrorism measures
perceptions of the likelihood of
political
instability
and/or
Political Stability politically-motivated violence,
and Absence of
including terrorism. Estimate
Violence/Terrorism gives the country's score on the
aggregate indicator, in units of a
standard normal distribution, i.e.
ranging from approximately -2.5
(very weak) to 2.5 (very strong)
Is the proportion of population
Population Aging
ages 65 and above of total
population
6
World
bank
World bank (2023)
World
bank
World bank (2023)
World
bank
World bank (2023)
3. DESCRIPTIVE STATISTICS
Herby Table 3.1 shows the descriptive statistics results:
Table 3.1. Descriptive statistics results
Variable
GDP
EXR
FDI
MNF
LBF
NIC
GFE
EXP
INF
PSA
AGE
Obs.
100
100
100
100
100
100
100
100
100
100
100
Mean
4.459
4,763.927
13.587
5.569
66.743
11,203.47
13.115
164.588
3.005
-.054
6.389
Std. Dev.
3.479
7,056.57
21.935
5.607
5.201
20,388.758
5.048
179.619
2.877
.853
2.477
Min
-9.518
1.249
-4.947
-9.782
54.75
764.808
4.806
3.53
-1.26
-1.392
3.493
Max
10.507
23,208.368
105.293
27.922
77.2
155,555.45
26.477
668.379
18.677
1.599
13.85
Source: data processed and condensed by the author using STATA 16
According to the results showed in Table 3.1, we can see that this sample has a total
of 100 observations, in which:
The mean of GDP is 4.459, which indicates the average annual GDP growth rate of
ASEAN countries is 4.459% with the highest annual growth rate of 10.507% belonging to
Myanmar in 2016; in the opposite, The Phillipines in 2020 has the lowest annual growth
rate of -9.518%. Besides, with the standard deviation value of 3.479, not very higher than
the mean value, which means most of the observations are relatively near the mean,
suggesting a narrow range of rate fluctuation in ASEAN countries in the period.
While the GDP growth is stable among AESAN countries, the EXR variable shows
the opposite when it has the mean value of 4,763.927 indicating that commonly the
currency of ASEAN countries are around 4,763 national currency per U.S. dollars.
Particularly, with the high value of standard deviation of 7,056.57, quite higher than mean
value, it can be referred that the the exchange rate of the ASEAN countries has strong
fluctuation with Vietnam having the highest value of 23,208.368/USD while Singapore’s
exchange rate is 1.249, relatively equals 1 U.S. dollars.
Despite having the disadvantage of the exchange rate, ASEAN countries are all
economically potential that the FDI inlfows into these countries remains at a promising
value of 13.587 million USD. However, this investment varying between countries with
standard deviation of 21.935, which is extremely high as the total investment inflows each
country is differently distributed throughout the period. In which, in 2020, Thailand has
the lowest FDI value in the entire period of -4.947 million USD, which is unusual; however,
7
it is believed that this number is driven party by the sale of Tesco (UK) to a group of Thai
investors for USD 10 billion (UNCTAD, 2022).
Similarly, as being heavily invested, the ASEAN countries has a steadily growing
manufacturing rate annualy as the mean value of the MNF variable stays at 5.569, which
suggests that every year, total value added in manufaturing in ASEAN countries rises
5.569%. Also this growig pace is quite the same among countries, which is proved by the
standard deviation of 5.607. Nonetheless, the growing rate of some countries in the region
is not able to catch up with the overall pace when hit the negative growing rate, specifically
-9.782% of The Phillipines in 2020. While the highest growing rate belong to Myanmar in
2011 of 27.922%. Contradictory, The Phillipines despite having the lowest rate in the
period, its manufaturing growth from 2011 to 2019 are stable that the annual rate always
stay positive, while Myanmar despite having thee highest value, its growth rate in the other
years are positive but not quite remarkable (except for 2012).
Regarding the labor force, the mean value 66.743 of the LBF variale indicates the
average popolation participating in labor force is at 66.7%, combined with the standard
deviation of 5.201, which is optimistically low, showing that the labor force participation
rate is the ASEAN countries are balanced and the differences is minimal. In which the
lowest value is 54.75%, still above 50% and the highest of 77.2%. Base on this results, it
can be seen that the labor force participation rate in the ASEAN countries is neither low or
high.
In terms of National income per capita, which is another important factor influencing
GDP growth, the descriptive statistics results show that the mean value of NIC remains at
11,203.47, the standard deviation stays at 20,388.758. This result indicates that the national
income per capita of the region is not very high, only 11,203.47 per year while the
spreading range of value is relatively high with the lowest value of only 764.808 USD
(Cambodia in 2011) and the highest value of 155555.446 USD (Myanmar in 2011). This
unbalanced result may derive from the outlier of 155555.446 belonged to Myanmar in 2011,
because except the stated year, from 2012 to 2020, the national income per capita of
Myanmar is around 1000 to 2000 USD.
As GFE shows a mean value of 13.115 and the standard deviation of 5.048, the
average government spending proportion is approxximately around 13.115% among
ASEAN countries with no strong fluctuation. In which, Brunei government spends most
with 26.447% GDP, while Cambodia spends only 4.806% GDP.
The EXP mean value and and standard value is 164.588 and 179.619 respectively,
indicating a relatively low in export value in half of ASEAN countries when there are only
Indonesia, Malaysia, Thailand, Singapore, and Vietnam having the high export value which
8
is above 100 million USD. Particularly, Laos in 2011 exported only 3.53 million USD
while Singapore possesses the highest value of 668.379 million USD in 2018.
The INF variable shows the mean of 3.005 showing every year, it takes the consumer
3.005% higher price compared to the previous year to purchase the same commodity.
Besides, The standard deviation of 2.877 suggesting a quite stable rate in the region.
However, with the unusual highest rate of 18.677 (Vietnam in 2011) which is suspected as
an outlier since the rest value from 2012 to 2020 is stable. Excluded that outlier, we can
see that the inflation rate in the ASEAN countries is relatively low with the lowest rate of
-1.26 belonged to Brunei in 2017.
The PSA shows the mean value of -0.54, indicating the political instituition in the
ASEAN countries are ranke as quite weak, also the state is the same between countries
with standard deviation of only 0.853 with the most political instable country is The
Phillipines in 2011 with the score of -1.392 and the most political stable country is
Singapore in 2017 with 1.599.
Finally, the AGE variable has the mean value of 6.389, showing 6.389% of population
ages from 65 and above, which can be inferred that the population structure in the ASEAN
countries is young. Besides, with the standard deviation of 2.477, the differences in old
population proportion in the ASEAN countries is minimal. In which, the country with
highest proportion of population ages 65 and above is Thailand in 2020 with 13.85% and
the lowest proportion is Brunei in 2011 with the rate of only 3.493%.
In general, the characteristics of GDP growth and factors influecning GDP growth are
commonly shared between ASEAN countries despite some countries possessing some
variance. According to the descriptive statistics results, the current situation in the region
regarding 10 factors (exchange rate, foreign direct investment, inflation, political stability,
labor force size, export of goods and services, national income, manufacturing,
government expenditure, and population aging) is humble but potential. All 10 ASEAN
countries should refer to their shared characteristics and cooperatively support each other
to unify their improvement and reach suistainable development.
9
REFERENCE
1.
Andrés, J. and Hernando, I. (2014) 'Inflation and economic growth : some
evidence for the OECD countries'.
2.
Auty, R. (2003) 'Natural Resources, Development Models and Sustainable
Development', SSRN Electronic Journal, available: http://dx.doi.org/10.2139/ssrn.424082.
3.
Banda, B. (2015) 'The Impact of Labour Productivity on Economic Growth:
The Case of Mauritius and South Africa', Southern African Journal of Policy and
Development, 2, 26-41.
4.
UNCTAD (2022) World Investment Report 2022. Available at
https://unctad.org/publication/world-investment-report-2022
10
APPENDIX
-
Descriptive statistics results from STATA 16
<sum, detail>
Variables
Country
Year
GDP
EXR
Obs
100
100
100
100
Mean
5.5
2015.5
4.459
4763.927
Std. Dev.
2.887
2.887
3.479
7056.57
Min
1
2011
-9.518
1.249
-4.947
-9.782
54.75
764.808
Max
10
2020
10.507
23208.36
8
105.293
27.922
77.2
156000
FDI
MNF
LBF
NIC
100
100
100
100
13.587
5.569
66.743
11203.47
GFE
EXP
INF
PSA
AGE
100
100
100
100
100
13.115
164.588
3.005
-.051
6.389
21.935
5.607
5.201
20388.75
8
5.048
179.619
2.877
.85
2.477
4.806
3.53
-1.26
-1.392
3.493
26.477
668.379
18.677
1.599
13.85
11
p1
1
2011
-7.792
1.249
Skew.
0
0
-1.604
1.442
Kurt.
1.776
1.776
5.749
3.857
-2.398
-8.281
56.843
793.31
p99
10
2020
9.353
23129.30
7
103.726
25.907
77.12
102000
2.594
.649
.307
4.095
9.239
6.183
2.375
26.566
4.866
3.541
-1.199
-1.385
3.546
26.349
665.042
14.066
1.54
13.529
.701
1.254
1.864
.249
1.29
3.195
3.943
10.364
2.035
3.964