An Empirical Study on the Impact of External Debt and Savings on Economic Growth in Vietnam

Abstract

This study analyzes the relationship between external debt, debt service obligations, and gross savings on Vietnam’s economic growth during 1996 – 2023 by applying an autoregressive distributed lag model combined with cointegration tests. The results indicate that in the long term, external debt has a positive impact on growth, confirming its role as a financial resource for development when effectively managed and utilized. In contrast, debt service obligations exhibit a negative effect, reflecting fiscal pressure and the risk of investment crowding out. Although gross savings have a positive influence on growth, the effect remains relatively unclear, suggesting that this potential should be more strongly leveraged and promoted in long-term development strategies. Notably, debt service obligations have a positive impact on national income in the short term, possibly stemming from improved market confidence and national creditworthiness following timely debt repayments. The findings of this study are compared with previous domestic and international research, thereby highlighting the similarities, differences, and specific policy implications for Vietnam. Consequently, this study contributes additional empirical evidence for the formulation of sustainable fiscal policies and strategic mobilization of resources to support future economic growth.