The sustainability of foreign borrowing in selected ASEAN countries

This article examined the sustainability of foreign borrowing in the selected ASEAN countries of Indonesia, Malaysia, the Philippines, and Thailand, all of which have faced a larger current account deficit since the 1990s. Whether the favorable gaps in terms of the excess of their growth rates of exports and GNP over LIBOR in the first half of the 1990s will still hold in the latter half of the 1990s, from the standpoints of the world macroeconomic environment and their policy actions is the question. The main implications are as follows. First, concerning the trends of the world macroeconomic environment, according to the projections of the World Bank and the IMF, there seems to be little possibility that world-wide shocks serious enough to trigger a world recession and a sharp rise in the interest rate like those of the early 1980s will occur in the next five years. Second, concerning policy actions, the improvement in the fiscal balance since the 1990s, the implementation of trade liberalization initiatives, and the recent transition to a flexible exchange rate system in Thailand and Indonesia are favorable trends for enhancing their growth of exports and GNP. The recent decreasing trends of ICOR in Thailand and the Philippines, however, imply some structural problems. In any case, further quantitative studies are needed on the discussion of the relations between policy actions and the growth of exports or GNP.