Governance perspectives on budget deficit and economic growth: Empirical insights from ASEAN economies

The paper investigates the relationship between budget deficits and economic growth in Vietnam and the Association of South East Asian Nations (ASEAN) countries from 2011 to 2022. Given the increasing fiscal imbalances, particularly exacerbated by the COVID-19 pandemic, understanding the influence of budget deficits on economic performance is crucial for policymakers. Using panel data regression models such as ordinary least squares (OLS), fixed effects model (FEM), random effects model (REM), and feasible generalized least squares (FGLS), the study examines three main questions: the relationship between budget deficits and economic growth, the effect of budget deficits on economic performance, and recommendations for improving economic performance in Vietnam and other ASEAN countries. The results reveal that budget deficits have a significant negative impact on economic growth in the ASEAN region. Specifically, there is a clear inverse relationship between government expenditure and budget deficits. The study suggests that reducing budget deficits could boost economic growth. Additionally, the study examines other variables affecting economic growth, such as domestic savings, investment, inflation, government spending, and domestic credit. The findings provide strong justification for enacting measures to lower budget deficits and promote sustainable economic growth in Vietnam and ASEAN countries.