Governments spend money to provide goods and services for residents, redistribute income across different groups in society, and fund objectives such as investments in public infrastructure. The amount of public expenditure provides an indication of the size of the public sector, although higher spending does not necessarily indicate better overall results. The scale of public expenditures is influenced by various factors, including the amount of resources governments raise as revenues and the accumulated effects of past policy decisions. However, total government expenditures often evolve relatively slowly. One reason is that public expenditures tend to increase during economic downturns, as spending on benefits to shelter citizens from economic impacts tends to rise. Another reason is that altering past policy decisions, particularly lowering the level of existing benefits to the public, can be a slow process. Nonetheless, governments across the SEA region increased public expenditures in response to the COVID-19 pandemic.
General government expenditures as a percentage of GDP provide a measure of the size of the public sector compared to the economy as a whole. Government expenditures across SEA countries were 19.9% of GDP on average in 2023 (Figure 2.15), increasing slightly from 18.9% in 2019. There is significant variation around this average, however, with Brunei Darussalam having the highest public expenditures (29.4% of GDP). Public expenditures in SEA countries are significantly lower than in OECD Member countries, where they average 43% of GDP. OECD countries in the Asia-Pacific region have public expenditures exceeding 35% of their GDP. There has been little change in the relative size of public expenditure levels in SEA since 2007, when they averaged 19.3% of GDP (Online Figure D.1.3).
General government expenditures per capita provide a measure of the resources governments can allocate to meet the needs of people living in their countries. As GDP and tax revenue have grown across the region, public expenditures per capita have also increased, from around USD 2 650 PPP in 2019 to around USD 3 550 PPP in 2023 (Figure 2.15). Increased expenditure can be used to provide goods and services to the public, increase wages for public sector workers, or to service the national debt. However, expenditures remain below the OECD average of around USD 22 800 PPP per capita. The two wealthiest countries in the SEA region, Brunei Darussalam (around USD 25 500 PPP) and Singapore (around USD 21 700 PPP), have public expenditures per person similar to those in OECD countries. Cambodia, Indonesia, Lao PDR, the Philippines and Viet Nam all have public expenditures of less than USD 3 000 PPP per capita.
Data on the scale of increases in public expenditure during the COVID-19 pandemic are shown in Figure 2.17. The response included increased funding for healthcare and a range of support to help the public and businesses manage the effects of restrictions on economic activity. The average increase in real public expenditure per capita in 2019-2020 was 11% across SEA, and 13% across the OECD. Singapore notably increased public expenditure by 70% during this period. As surges in COVID-19 cases affected some SEA countries later than other regions of the world, some further increased public expenditures during 2020-2022, notably the Philippines, which increased public expenditure by 6% during this period. Most SEA countries have since either cut public expenditures per capita or limited their growth.
