Governments spend money to provide goods and services, redistribute income and pursue economic development objectives. The amount of financial resources that governments spend provides an indication of the public sector’s size, although this does not necessarily reflect its performance. Though government expenditures are usually less elastic than government revenues, they are also sensitive to economic developments associated with macroeconomic conditions and the business cycle. They also reflect past and current political decisions.
General expenditures in SEA countries represented on average 20% of GDP in 2016. However, there is significant variation in expenditure across SEA countries: Brunei Darussalam and Viet Nam reported levels of 39% and 30% of GDP respectively, in line with expenditure levels of the four OECD countries in the region. In countries such as Indonesia, Singapore and the Philippines, however, levels were below 20%. Overall, SEA countries spend on average significantly less in relation to their GDP than OECD countries, where the 2016 average of government expenditure was 40.6% of GDP. The OECD’s 2018 Economic Survey in the region also highlights that infrastructure and communications technology, particularly in rural areas, is an area which would benefit from further investment, as well as public spending on education and research and development.
Government expenditures related to GDP have stayed remarkably stable in SEA countries over time. There have been notable fluctuations in certain countries, however. Between 2007 and 2016, government expenditure in Brunei Darussalam increased by 9.8 p.p. reaching 39.1% of GDP. Myanmar and Cambodia also experienced significant increases in government spending in relation to GDP during this period, by 7.6 p.p. and 7.1 p.p. respectively. Malaysia and Indonesia are the only two SEA countries in which government expenditures decreased between 2007 and 2016 relative to GDP, by 2.9 and 1.9 p.p. respectively.
On average, expenditure per capita across SEA countries represents USD 2 330 PPP in 2016. This is just over 13% of the expenditure for OECD countries, where government expenditures per capita account for USD 17 680 PPP in the same year. Brunei Darussalam (USD 30 251 PPP) had the highest level of government expenditures per capita, spending 1.7 times the OECD average and 13 times the SEA average. However, Brunei Darussalam is a rather exceptional country, given its natural resource wealth and small population. Singapore’s government spending per person, at USD 16 003 PPP, is in line with the OECD average.
Between 2007 and 2016, the annual average growth rate of real government expenditures per capita was 3.7% on average in SEA countries, much higher than the 1% rate in OECD countries during the same period. All SEA countries have experienced growth in expenditures, though to varying degrees. In Cambodia, Lao PDR and Myanmar, government spending per person went up by an annual rate of more than 9%. In Brunei Darussalam and Malaysia, it grew by less than 2%. While overall government expenditure levels in SEA are much lower than in OECD countries, real government spending per capita in SEA has been growing.
