The Impact of Private Credit and Foreign Direct Investment on Economic Growth: Evidence from ASEAN-5 Countries

An analysis of ASEAN-5 economies from 1986–2023 finds that foreign direct investment (FDI), investment activity, and trade openness are positively associated with long-term economic growth, while excessive private credit expansion may undermine growth when lending outpaces productive absorption. FDI supports economic performance through technology transfer, infrastructure development, skills enhancement, and deeper global integration. The findings also highlight the importance of efficient credit allocation and prudent fiscal management, as unproductive credit growth and inefficient government spending can create economic vulnerabilities. Policy recommendations emphasize attracting high-quality FDI, strengthening financial oversight, promoting trade, and enhancing public spending efficiency.

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