Governments are responsible for the provision of various goods and services to their populations. Some of these are under their exclusive jurisdiction, for example the justice system, whereas others, like healthcare, may be provided by both government and private entities. In addition to providing services, governments also strive to redistribute income across society, through social benefits and subsidies. The level of public provision of goods and services varies significantly between countries depending on their policy choices, current priorities and their political systems and traditions. Across OECD countries, government expenditures are primarily allocated to the provision of public services and income transfers. Government expenditures tend to be more stable over time than government revenues, which are more dependent on economic cycles. Through public spending, governments provide people with a reliable safety net, guaranteeing them certain entitlements and protecting them from economic fluctuations.
General government expenditures amounted to 46.3% of GDP on average across OECD countries in 2021. France (59.1%), Greece (57.7%) and Italy (57.3%) were the countries with the largest share of government expenditures relative to GDP. Between 2019 and 2021 general government expenditures as a percentage of GDP increased by 5.4 percentage points, from 40.9% in 2019 (Figure 11.1). This increase is largely explained by the COVID-19 pandemic, which led to significant economic disruption. This prompted large-scale fiscal stimuluses, including increased spending on healthcare, social welfare programmes, and support for businesses and individuals affected by the pandemic, while at the same time GDP was falling.
Government expenditures peaked in 2020 in the OECD and the largest OECD economies due to the COVID-19 pandemic (48.4% of GDP on average across OECD countries) and fell in 2021 and 2022. However, levels are still much higher than they were before COVID-19 (Figure 11.2). In 35 out of 38 OECD countries, government expenditures as a percentage of GDP increased between 2019 and 2021, with Greece (9.6 p.p.) and Italy (8.8 p.p.) reporting the largest increases. Between 2021 and 2022 public spending decreased as a share of GDP in 26 out of 27 countries with available data; the exception was Luxembourg, where it increased by 0.4 p.p. (Figure 11.1).
In 2021, across OECD countries, general government spending per capita averaged USD 23 432 PPP, ranging from USD 5 637 PPP in Mexico to USD 56 357 PPP in Luxembourg. Between 2019 and 2021 spending per capita increased on average by USD 3 695 PPP. The largest increases occurred in the United States (USD 6 663 PPP) and Luxembourg (USD 4 925 PPP) (Figure 11.3).
The annual growth rate of real government expenditure per capita was 12.5% on average across OECD countries in 2020. The growth rate slowed in 2021 to 0.64% on average, much smaller than in 2020. Among countries with available data, spending per capita started falling in 2022: 21 of 27 countries reported negative growth, with Norway recording the biggest downturn (-17.0%) (Online Figure G.6.1).
