Public debt refers to the stock of government borrowing due to past budget deficits. Higher public debt means a government must spend more money each year on capital and interest repayments. If financial markets believe a government may have difficulty repaying its debt,its access to credit can be affected; thus, governments need to manage public debt levels. Ideally, borrowed funds should be used in ways that support economic growth, making it easier to repay debt in the future. As fiscal balances worsened across the SEA region due to the COVID-19 pandemic, public debt levels also increased.
Levels of public debt vary widely across SEA countries, from 2% of GDP in Brunei Darussalam to 173% in Singapore (Figure 2.7). On average, general government gross debt levels rose from 44% of GDP in 2019 to 58% in 2023. Gross debt increased over this period in seven of nine countries. This impact is also shown in figures showing increased budget deficits (Figure 2.1 and Figure 2.4) across much of the region during the pandemic. Similar trends were seen in OECD Member countries in the Asia-Pacific region, with general government gross debt increasing in all four between 2019 and 2023.
This recent increase is seen clearly when debt levels are examined over time (Figure 2.8). Debt levels increased substantially between 2019 and 2020 in Indonesia (from 31% to 40% of GDP) and Thailand (from 41% to 49% of GDP, then 62% by 2023). Viet Nam is a notable regional outlier, having reduced its gross debt from 41% of GDP in 2019 to 34% in 2023. During the pandemic, Viet Nam prioritised reallocation of spending from other policy areas in order to contain debt accumulation. Financing through state-owned enterprises (e.g. soft loans provided by state-owned banks) and extra-budgetary funds (i.e. social security funds) was also mobilised to cover additional financial support to affected households and businesses. Together with positive economic growth, these efforts helped to contain general government debt (though liabilities may have accrued outside of this accounting measure) (OECD, 2023).
Another metric for examining debt levels is public debt per capita. On average across SEA countries, general government gross debt per capita increased from around USD 6 250 PPP in 2019 to around USD 10 400 PPP in 2023 (Figure 2.9). All nine countries in the region saw increases in public debt per capita during this period, as did the four OECD countries in the Asia-Pacific region. On average across OECD countries, general government gross debt per capita increased from around USD 58 100 PPP in 2019 to around USD 72 400 PPP in 2023. While debt per capita is significantly higher in OECD countries than in most SEA countries, OECD countries also have higher levels of income per capita and a higher ability to repay debts. A similar situation applies in Singapore, which has the highest debt per capita among SEA countries (around USD 252 600 PPP in 2023) but also has the highest income levels and debt repayment capacity in the region.
