FDI, Exchange Rates, and Digital Economy Drive ASEAN-5 GDP Growth, Study Finds

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FORMOSA NEWS - Surabaya - Economic growth across five major Southeast Asian economies is strongly influenced by foreign investment, currency stability, and digital adoption. A 2026 study by Novlyzanta Chantika Prameswary and Ladi Wajuba Perdini Fisabilillah from Universitas Negeri Surabaya analyzes data from 2014 to 2024 and shows how macroeconomic and digital factors shape Gross Domestic Product (GDP) in Indonesia, Malaysia, Singapore, the Philippines, and Thailand. The findings matter because these five countries account for more than 85% of ASEAN’s total GDP and play a critical role in global economic growth.

ASEAN Growth in the Digital and Global Era

ASEAN has become one of the world’s fastest-growing economic regions, supported by strong trade integration and foreign direct investment (FDI). Over the past decade, growth drivers have expanded beyond traditional macroeconomic variables. Digital transformation, especially through widespread internet adoption, is now a central force shaping economic performance.

In this context, understanding how FDI, exchange rates, inflation, and digital economy indicators interact is essential for policymakers and businesses. The research highlights how these factors collectively influence economic expansion in a rapidly evolving global landscape.

Simple Overview of the Research Approach

The study uses a quantitative design based on secondary data from the World Bank covering the period 2014–2024. It analyzes 55 observations across the five ASEAN countries using a panel regression model.

The variables examined include:

• GDP as the measure of economic growth
• Foreign Direct Investment (FDI) as a share of GDP
• Exchange rates against the US dollar
• Inflation based on consumer price index changes
• Digital economy development measured by internet user penetration

The model explains 96.04% of GDP variation, indicating a very strong relationship between these variables and economic growth.

Key Findings: What Drives Economic Growth

The research identifies three major drivers of GDP growth and one moderating factor:

• Foreign Direct Investment (FDI) boosts GDP significantly

A 1% increase in FDI is associated with a 0.88% rise in GDP. Foreign investment contributes not only capital but also technology transfer and productivity improvements.

• Exchange rates play a strong positive role

A weaker domestic currency (depreciation) increases GDP by up to 16.8%. This occurs because exports become more competitive and foreign investment becomes more attractive.

• Digital economy accelerates growth

An increase of 1% in internet users leads to a 0.65% rise in GDP. This confirms that digital connectivity supports business efficiency, innovation, and market expansion.

• Inflation shows a negative but insignificant effect

While a 1% increase in inflation reduces GDP by about 0.91%, the effect is not statistically significant. This suggests inflation levels in ASEAN-5 remain relatively stable and manageable.

Why These Findings Matter

The study highlights a clear shift in economic growth patterns. Traditional drivers like investment and exchange rates remain important, but digital transformation is emerging as a powerful new engine.

For governments, the findings suggest four strategic priorities:

Strengthening investment ecosystems

Policies that improve infrastructure, reduce bureaucracy, and enhance workforce skills can maximize the benefits of FDI.

Maintaining competitive exchange rates

Stable and balanced currency policies can support exports while avoiding excessive volatility.

Controlling inflation effectively

Even if inflation is currently stable, maintaining price stability remains critical to protect purchasing power and investor confidence.

Accelerating digital transformation

Expanding internet access, improving digital literacy, and supporting innovation ecosystems can significantly boost long-term growth.

Real-World Impact on Society and Business

For society, the expansion of the digital economy creates new job opportunities, especially in technology, e-commerce, and digital services. Increased internet access also improves access to education, healthcare, and financial services.

For businesses, the findings highlight the importance of digital adaptation. Companies that integrate digital technologies into their operations are more likely to increase productivity and compete globally.

For policymakers, the research provides evidence-based guidance for balancing macroeconomic stability with digital innovation. It shows that sustainable growth depends on integrating both traditional and modern economic drivers.

Academic Insight from the Authors

Novlyzanta Chantika Prameswary of Universitas Negeri Surabaya emphasizes that economic growth in ASEAN is no longer driven by a single factor. She explains that foreign investment, exchange rate stability, and digital adoption must work together to create sustainable economic expansion.

This perspective reflects a broader shift in economic thinking, where digital infrastructure is treated as essential as physical infrastructure.

Author Profiles

Novlyzanta Chantika Prameswary is a researcher at Universitas Negeri Surabaya specializing in macroeconomics and digital economy analysis. Her work focuses on how technological and financial factors influence economic growth in developing regions.

Ladi Wajuba Perdini Fisabilillah is an academic at Universitas Negeri Surabaya with expertise in development economics and economic policy analysis, particularly in ASEAN economies.

Source

Prameswary, N. C., & Fisabilillah, L. W. P. (2026). The Impact of Macroeconomic and Digital Economy Factors on the GDP of the ASEAN-5. Formosa Journal of Multidisciplinary Research, Vol. 5 No. 4, 1225–1238.

DOI: https://doi.org/10.55927/fjmr.v5i4.60, URL: https://journalfjmr.my.id/index.php/fjmr