Government deficits or surpluses are sensitive to the economic cycle as well as to government taxation and spending policies. These deficits or surpluses affect economic activity, inflationary pressures and external imbalances.
The net borrowing or net lending of the general government is the balancing item of the non-financial account for this sector (according to the 1993 System of National Accounts). It is also equal to the difference between total revenue and total expenditure, including capital expenditure. The general government sector consists mainly of central, state and local government units together with social security funds controlled by those units. The main revenue of general government consists of taxes, social contributions, dividends and other property income. The main expenditure items consist of the compensation of civil servants, social benefits, interest on the public debt, subsidies and gross fixed capital formation. A negative figure indicates a deficit.
The data shown here are on a national accounts basis. These may differ from the numbers reported to the European Commission under the excessive deficit procedure (EDP) for some EU countries and for some years.
Data are based on the 1993 System of National Accounts or on the 1995 European System of Accounts so that all countries are using a common set of definitions. In several OECD countries the accounts for 2000, 2001 or 2002 were affected by the sale of mobile telephone licenses, recorded in national accounts as a negative expenditure (the sale of an asset) thereby reducing the deficit. To ensure consistency with official national accounts data some very large one-offs transactions which had been excluded in the past have been reintegrated in the data (Germany and Netherlands in 1995, Japan in 1998). See the OECD Economic Outlook Sources and Methods (www.oecd.org/eco/sources-and-methods) for more details.
Data for Brazil are calculated as total claims on the general government from the monetary survey. Data for South Africa refer to fiscal years, running from 1 April to 31 March; data come from the National Treasury and differ from those reported by Statistics South Africa and the South African Reserve Bank.
In the run-up to monetary union, EU countries that expected to adopt the Euro as their currency followed fiscal policies aimed at reducing government deficits. Deficit reduction policies were successfully implemented in several other countries, including New Zealand since 1994 and Australia, Denmark, Finland and Sweden since 1998. Korea is the only country which has recorded surpluses throughout the period, although Norway has had surpluses in most years since 1990.
For the OECD as a whole, deficits as a percentage of GDP reached a peak in 1993 but then fell over the next six years (with the exception of the large one-off rise which occurred in Japan in 1998) and turned into surpluses (net lending) at the peak of the economic cycle in 2000. In the period that followed, government deficits rose until 2003 in most countries, especially in France, Germany, Japan, the United Kingdom and the United States. During the period 2004-2006, the deficit to GDP ratios fell in most countries except Hungary, Italy, Portugal and the Slovak Republic. In 2007 most countries improved further their fiscal position, with the exception of Belgium, France, Greece, Japan, the United Kingdom and the United States, where deficits continued to increase.
Fiscal positions in 2008 deteriorated in all countries reported here, with the exception of Norway and Switzerland. The government deficit rose to 13.6% of GDP in Iceland, and to 7.8% in Greece, while in Ireland the small surplus of 2007 gave way to a deficit of 7.2% of GDP in 2008. The government deficit also increased to 6.5% of GDP in the United States and to 5.3% of GDP in the United Kingdom.