Volume 4 • Issue 2 | July 2020
Economic Growths of ASEAN-5 Countries Impacted by Global and Domestic Credit Risks
Jin-Chuan Duan, Yanqi Zhu
Abstract:
The five founding members of ASEAN - Indonesia,
Malaysia, the Philippines, Singapore, and Thailand (a.k.a.
ASEAN-5) have maintained moderate economic growths
over the past decades. The role of the credit risk cycle in
predicting the economic growths of the ASEAN-5 countries
is the focus of this paper. Our analysis suggests that the
aggregate credit risks of Malaysia and Singapore co-move
strongly with the global credit risk cycle while those of
Indonesia, Malaysia and the Philippines are more sensitive
to regional/domestic credit risk shocks. By comparing to a
benchmark growth forecasting model with typical macroeconomic indicators, we find that information on credit risk
environments improves the model’s explanatory power considerably. The economic growths of all except for Indonesia
respond significantly to either global or domestic credit risk
movements, or both. Not surprisingly, inclusion of more updated and readily available credit risk assessments arriving
intra-quarter can, in a spirit similar to nowcasting, further
boost the model’s forecasting performance on economic
growths.