Public social expenditure

In 2018/2019, public social expenditure-to-GDP ratios varied considerably across the Asia/Pacific region. However, they were generally well below the OECD average (Figure 4.10). Average public spending on social protection in the Asia/Pacific region was about one-third of the average in the OECD as a whole. Public social spending in Japan was about 22% of GDP, close to 20% in New Zealand while it was around 10% of GDP in China and Mongolia. By contrast, public spending on social protection is around 2% of GDP in Bangladesh, Lao PDR and Papua New Guinea.

The distribution of public social spending also varies across countries (Figure 4.11). On average, public spending on social insurance accounts for almost half of social spending; health expenditure accounts for more than one-third; and, social assistance for less than one fifth. However, there are large variations across countries. Many Asia/Pacific economies have relatively young populations compared to OECD countries (see Figure 2.13), which helps to explain relatively low public spending on pension benefits (Pensions: Coverage and replacement rates).

In many Asia/Pacific countries, social insurance supports cover the relatively small public and formal sectors, and does not cover the large group of informal workers and/or self-employed workers and the elderly population who had little opportunity to contribute to pension schemes in the past. In all, social insurance benefits in many Asia/Pacific countries do not benefit the poor. Social insurance (including pensions) accounts for about 65% of reported social protection expenditure in Azerbaijan and Malaysia, whereas it is less than 5% in Georgia and the Maldives. Social assistance (including assistance for the elderly, child welfare, disability, welfare assistance) usually accounts for a relatively small share of reported social protection expenditure. Health accounts for more than two-third of social expenditure in Bhutan, Lao PDR and the Maldives whereas in Armenia and Azerbaijan only less than one fifth is dedicated to health-related risks. Active labour market programmes play a relatively small role, except in Bangladesh where ALMPs account for about 13% of reported social protection expenditure (Figure 4.11).

Considering absolute poverty rates in low- and middle-income countries, it appears that countries with higher public social expenditure tend to be those with lower absolute poverty rates (Figure 4.12). This suggests that public social spending helps to alleviate disadvantage and enhances equity.

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