Data on public expenditure by economic transaction (referred to below as “by type”) provides information on the size of government expenditures in areas such as public investment, provision of benefits to the public, and spending to service public debt. Some caution should be applied in interpreting these data for the SEA region. Data on public expenditures by type are available for only five countries; therefore, the findings may not accurately reflect developments in other countries. Moreover, the most recent data are from 2022, which may partially reflect the temporary changes in the composition of public expenditure made in order to respond to the COVID-19 pandemic, discussed in the previous indicator.
Total public expenditures by SEA countries for which data are available average 19% of GDP (Figure 2.21). This ranges from 15% of GDP in Lao PDR to 26% in the Philippines. All SEA countries spend a substantially smaller proportion of GDP than OECD Member countries, which on average spend 43% of GDP. The most substantive difference in expenditure patterns is in social benefits. These average 17% of GDP in OECD countries in the Asia-Pacific region, and 2% of GDP across SEA countries. In some cases, differences in expenditure composition also reflect domestic policy priorities. Notably, Cambodia currently allocates 6% of its GDP to public investments, and Lao PDR 4%, both figures higher than the average of 3.5% in OECD countries. In Cambodia, this reflects a significant public infrastructure programme.
In most SEA countries for which data are available, the largest category of public expenditures was compensation of employees (Figure 2.22). These are wages paid to public sector workers, including both civil servants and people employed in public bodies, such as public schools and hospitals. However, spending on compensation of employees fell from an average of 29% of public expenditures in 2019 to 24% in 2023. Other areas have seen growth in spending in some countries. Grants and other expenses increased from 5% to 18% of public expenditure in Singapore. This partly reflects temporary grants made to support businesses during the COVID-19 pandemic. For example, Singapore allocated SGD 500 million (Singaporean dollars) (USD 390 million) in grants to support workers and businesses in segments of the economy facing slower recoveries (Singapore Ministry of Finance, 2022). In Cambodia, spending on social benefits increased from 3% to 11% of public expenditure, while spending on grants fell from 6.8% to 1% of spending. Social benefits are transfers of cash or benefits-in-kind that help protect certain parts of the population from social risks, such as unemployment benefits. Indonesia increased spending on subsidies from 7.9% to 13.9% of spending. Other types of public expenditure altered little between 2019 and 2023. SEA countries allocate a proportionally smaller share of public expenditure to social benefits (10% on average) compared to OECD countries (39% on average) and a substantially larger proportion of public expenditure to investment (17%) compared to OECD countries (8%).
