Download 25. Fiscal balance

Statistical Yearbook for Asia and the Pacific 2014
25. Fiscal balance
Most countries in the region have a modest fiscal deficit and have experienced a
slight increase in central government revenue.
During the period between 2010 and 2012, the
region as a whole had a modest fiscal deficit of
around 3.5%. However, some countries —
namely, India, Japan, Kyrgyzstan, Maldives,
Pakistan, Sri Lanka and Timor-Leste —
continue to have large fiscal deficits, over 5%
of GDP. India, Kyrgyzstan, Pakistan and
Samoa were able to reduce their fiscal deficits in
2013. Timor-Leste’s fiscal deficit improved only
marginally from 33.4% of GDP in 2012 to
27.1% in 2013, while fiscal balances
deteriorated in Georgia, Indonesia, the Lao
People’s Democratic Republic, Myanmar,
Tajikistan and Viet Nam.
Fiscal balance or fiscal space is critical for
Governments to perform their developmental
and stabilization roles.1 Most countries in the
Asia-Pacific region had a small deficit — 3% of
GDP or less — during the period leading up to
the 2008-2009 global financial crisis. In 2007,
only Tajikistan had a high fiscal deficit of
around 8% of GDP, followed by Sri Lanka
with 6.9% of GDP. A number of countries, in
fact, had a surplus in 2007, the highest being in
Singapore (11.2% of GDP), followed by Hong
Kong, China (7.5% of GDP).
This meant that when the effects of the global
financial crisis hit the region, most countries
had fiscal space to roll out countercyclical
measures to mitigate the impacts of global
economic slowdown. As a result, fiscal balance
deteriorated during the period between 2008
and 2009. However, most countries
consolidated their fiscal positions in 2010,
following a robust recovery.
Fiscal space depends on both government
revenue
and
expenditure.
Therefore,
policymakers need to examine whether the rise
in fiscal deficits or public debt is due to falling
revenue or rising expenditure. Central
government revenue in the region has increased
marginally from 16.5% of GDP in 2009 to
around 18% in 2012. While this is an
encouraging achievement, Governments need
to strengthen their revenue efforts in light of
the financing needs of sustainable development.
Governments’ tax or revenue efforts, however,
must not hurt the poor and low-income
segment of the population disproportionately
and hence there should be more reliance on
direct taxation.
In 2012, government expenditure in the region
stood at around 21.5% of GDP. However, this
aggregate figure does not indicate where this
has been spent or what the priority areas are.

The Asia-Pacific region has a relatively moderate fiscal space, with considerable country
variations.

Fiscal space is crucial in pursuing countercyclical measures and implementing developmentoriented public programmes.

Aggregate fiscal balance is a useful tool to assess macroeconomic situations; but one needs to
examine the details of expenditure allocation and patterns, as well as sources, of revenues to
assess development impacts.

Central government revenues display a rising trend in the region; but revenue efforts need
further strengthening by improving tax administration and closing tax loopholes, while
ensuring a progressive tax structure.

Government expenditure should be geared more towards sustainable development. 1
1
United Nations, Economic and Social Commission for Asia and the Pacific, Economic and Social Survey for Asia and the Pacific
2013: Forward-Looking Macroeconomic Policies for Inclusive and Sustainable Development (Bangkok, 2013).
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