Fiscal Policy for Inclusive Growth in Asia

This paper discusses how fiscal policy can help foster more inclusive growth in developing Asia. On average, government expenditures in developing Asia are higher, as a share of gross domestic product, than those in Latin America and the Caribbean. Relative to Latin America, developing Asia spends more on social benefits, but less on education and health. While general government revenues have risen since 2000, they are still not sufficient to fully fund targeted transfer programs and provide adequate in-kind benefits to the population. Against this background, this paper discusses priorities for policy reforms as countries in the region seek more inclusiveness and confront the effects of the coronavirus disease (COVID-19). The paper finds that eliminating inefficiencies in health, education, and public investment, for example, would generate the equivalent of 3 percent of gross domestic product. Savings from curtailing subsidies for fossil fuels would also generate resources for expanding redistributive spending. Reallocating health spending toward primary care, and education spending toward primary and secondary education, would help lead to more equitable growth. There is also scope to raise spending on social benefits and better target them to the poor.

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