The fiscal balance is the difference between a government’s revenues and expenditures. It signals whether public accounts are in surplus or deficit. Recurrent deficits imply the accumulation of public debt and may send negative signals to consumers and investors about the sustainability of public accounts, deterring consumption or investment decisions. Nonetheless, if debt is kept at a sustainable level, deficits can help to finance necessary public investment and can contribute to maintaining living conditions in difficult or unexpected circumstances (such as recessions, pandemics or natural disasters).
In 2023, the average general government fiscal balance across OECD countries was -4.6% of GDP, indicating a widespread fiscal deficit. Only six OECD countries recorded a fiscal surplus, with Norway posting the highest at 16.5% of GDP. In contrast, 31 member countries ran fiscal deficits, highlighting the overall trend of government spending exceeding revenue. Similarly, among the 27 OECD-EU countries for which data is available for 2024, 6 recorded a surplus and 21 a deficit (Figure 15.7). Governments’ fiscal balances were subject to major shocks during the global financial crisis in 2009 (when the OECD average deficit reached -8.5% of GDP) and during the COVID-19 pandemic in 2020 (when it reached -10.2% of GDP). As of 2023, the average fiscal deficit across the OECD had improved to -4.6% of GDP, though it had not yet returned to its pre-pandemic average of -2.9% between 2015 and 2019 (Figure 15.8).
Net interest payments measure the amount governments spend on interest and capital repayments on public debt. Across OECD countries, net interest payments averaged 2.3% of GDP in 2023. The general government primary balance is the difference between government revenues and expenditures, excluding these interest payments. This sheds light on government’s ability to honour its debt repayment commitments without incurring additional debt to pay for other expenses. The average primary balance across OECD countries in 2023 was -2.4% of GDP. Only 10 of 36 OECD countries recorded a primary surplus in 2023, of which the largest was Norway (13.9% of GDP) (Online Figure J.10.3).
The structural primary fiscal balance aims to correct the primary balance for effects of the economic cycle or one-off events. During economic downturns, government revenues tend to fall and spending to increase as more people claim benefits. The opposite occurs during economic upturns. By removing these effects, the structural primary balance can help to assess the long-run sustainability of public finances. During the COVID pandemic, the average structural primary deficit across OECD countries fell from -1.7% of potential GDP in 2019 to -5.7% in 2020 (Online Figure J.10.4). By 2023 it recovered to -2.5% of potential GDP. However, 21 of 33 OECD countries had not yet regained the balance they had prior to COVID. By the end of 2026, the average structural primary balance across the OECD is projected to improve to -2.2% of GDP, with 16 of 33 OECD countries forecast to improve since 2024 (Figure 15.9).
