Bayesian time-varying panel analysis of healthcare expenditure and economic growth across income groups in Southeast Asia

Health spending and economic growth reinforce each other: better health raises productivity, while economic expansion enables higher investment in healthcare. Understanding both directions is essential for effective development policy in Southeast Asia. This study examines the bidirectional relationship between healthcare expenditure and per capita GDP growth in ten ASEAN countries from 2000 to 2022. A Bayesian dynamic panel model is used to jointly estimate the two directions of influence—how healthcare spending relates to economic growth and how growth, in turn, relates to health expenditure. The analysis also includes labor-force participation, purchasing power parity, and population growth as controls and distinguishes between high-, upper-middle-, and lower-middle-income countries. The model incorporates time-varying coefficients, allowing the strength of these relationships to shift with changing macroeconomic and fiscal conditions. Results show that healthcare expenditure is positively associated with GDP growth but not statistically significant in the same year, while lagged estimates suggest delayed economic benefits from health investment. The time-varying patterns reveal that the association slightly weakens around periods that coincide with major disruptions such as the 2008–2009 global recession and the COVID-19 pandemic, before showing a partial rebound thereafter. Conversely, GDP growth shows limited and mostly insignificant effects on health expenditure, consistent with a gradual adjustment in government health budgets in response to economic conditions rather than an immediate fiscal expansion. Overall, the findings suggest a delayed and uneven health–growth linkage across ASEAN economies, influenced by income heterogeneity and fiscal–macroeconomic environments.