In this article, we will look at the 15 countries with the largest budget deficit as a percentage of GDP. If you want to skip our detailed analysis, you can go directly to the 5 Countries with the Largest Budget Deficit as a Percentage of GDP.
A budget deficit occurs when the government’s spending on public service, infrastructure, and other projects exceeds its revenue over a period, thus resulting in a negative balance of payment. While a budget deficit can bring positive effects on the economy in a short-term analysis by increasing aggregate demand, uplifting an economy from a recession, and increasing government spending. It is contagious in the long run for the economy’s overall health and can lead to higher borrowing, higher interest payments, and low investment rates. Even some of the leading global economies, including the United States and China, are not immune to the challenge of having a budget deficit. According to the IMF, the Asia-Pacific region is on track to contribute two-thirds to global growth in 2024. However, a majority of our countries with the largest budget deficit as a percentage of GDP belong to the Asia-Pacific region.
Asia Leading the Global Economic Growth
According to the IMF, global economic growth has been surprisingly resilient, and inflation rates continue to fall steadily. The IMF now estimates a global growth of 3.1% in 2024, the same as the year before, and anticipates a gradual increase of 0.1% in 2025. Factors contributing to economic growth are two-pronged. On the one hand, strong government and private spending upholds the demand side. On the other hand, the high participation in the labor market, low energy prices, and ease of supply chain bottlenecks foster a smooth supply side.
The economic outlook of the Asia Pacific region reflects the global growth trends. The IMF has raised its growth projections for Asia and anticipates that the region’s economy grew at 4.7% in 2023, showing a 0.1% increase from October 2023 estimates. Moving ahead, the growth for 2024 is projected to be 4.5% against the previous projection of 4.2% in October 2023. India and China are the major contributors to the upward revisions. While India continues to demonstrate a strong domestic demand, thereby fostering growth, China is working on its growth by increasing spending on disaster reconstruction and resilience projects.
Although the economic outlook has shown progress, multiple factors threaten its resilience. The foremost risk is China’s property sector crises, which can further derail public demand, thereby affecting the regional trade balance. Furthermore, the prevailing risk of geopolitical fragmentation due to the less efficient supply chain and Asia’s deep integration in global trade also threaten the regional economic outlook. However, on the bright side, a stronger-than-expected policy response from China coupled with the swift progress by the emerging Asian economies can boost demand and generate positive spillovers in the long run. To read more about the economic outlook of Asia, you can look at the 25 Poorest Countries in Asia by GDP per Capita and the Top 20 Most Innovative Economies in Asia.
Leading Companies in Asia
Alibaba Group Holding Limited (NYSE:BABA), Reliance Industries Limited (NSE:RELIANCE), and Tata Consultancy Services Limited (NSE:TCS) are some of the companies driving growth in the Asia Pacific region. To read more about Asian countries, you can look at the 20 Most Valuable Asian Companies Heading into 2024.
Alibaba Group Holding Limited (NYSE:BABA) is a leading e-commerce platform. The company provides digital infrastructure to brands, merchants, and retailers, enabling them to sell various products online. On February 7, Alibaba Group Holding Limited (NYSE:BABA) announced its earnings for the fiscal fourth quarter of 2024. The company reported earnings per share of $2.64. The revenue for the quarter grew by 0.82% and amounted to $36.19 billion. Here are some comments from Alibaba Group Holding Limited’s (NYSE:BABA) earnings call for Q3 2024:
The number of merchants continue to grow at a double-digit rate, and I’ll elaborate on the outlook and plans for 2024 in a moment. In Cloud Computing, we’re committed to our strategy of prioritizing public cloud. We have proactively optimized our business structure, reduced revenue from project-based contracts and increased investment in public cloud products. These structural adjustments are showing results and Alibaba Cloud’s overall profitability capability continues to improve. We’ve also upgraded Alibaba Cloud’s sales operations establishing different sales and service systems to serve different types and sizes of customers by improving our customer coverage and service capabilities, we will enhance our growth rate. In the International Commerce business, we focused on expanding cross-border offerings and enhancing the shopping experience.
Reliance Industries Limited (NSE:RELIANCE) is one of India’s largest conglomerates and a leading multinational giant. The company has a diverse portfolio run by various wholly owned subsidiaries. On February 28, Reliance Industries Limited (NSE:RELIANCE) announced a partnership between one of its subsidiaries, Reliance Consumer Products Limited, and Elephant House, a leading Sri Lankan Beverage brand. The partnership will allow Elephant House to manufacture and sell its beverages in India, thereby adding to Reliance Consumer Industries Limited’s portfolio.
Tata Consultancy Services Limited (NSE:TCS) is a leading multinational information technology provider based in Mumbai, India. Tata Consultancy Services Limited (NSE:TCS) is a subsidiary of Tata Private Limited, another leading conglomerate in India. On March 14, Tata Consultancy Services Limited (NSE:TCS) announced its partnership with Nuuday, a Danish digital connectivity and communication company. Under this multi-million dollar deal, Tata Consultancy Services Limited (NSE:TCS) will shift Nuuday’s information technology infrastructure to its hybrid cloud. The transformation will allow Nudday to market its new products and services faster, thus enhancing the overall experience for its customers and employees.
With this context, let’s look at the 15 countries with the largest budget deficit as a percentage of GDP.
An expansive view of the cityscape, showing the impact of the company’s activities in China.
Our Methodology
To curate the list of 15 countries with the largest budget deficit as a percentage of GDP, we sourced our data from IMF’s Fiscal Monitor 2023. Under the Fiscal Monitor 2023, we relied on the general government net lending/borrowing as a percentage of the GDP indicator, also called the overall balance. It is a good indicator for calculating a budget deficit as it shows the difference between revenue and total expenditure as a percentage of GDP. We have also included current GDP figures for 2023 sourced from the IMF. The list is arranged in descending order of the Net lending/borrowing as a percentage of GDP.
15 Countries with the Largest Budget Deficit as a Percent of GDP
15. China
General government net lending/borrowing (2023) (Percentage of GDP): -7.111%
Current GDP (2023): $17.70 trillion
China is an East Asian country. It ranks 15th on our list of countries with the largest budget deficit as a percentage of GDP. China had a budget deficit of 7.111% of its GDP in 2023. Moreover, it had a GDP of $17.70 trillion the same year.
14. Brazil
General government net lending/borrowing (2023) (Percentage of GDP): -7.118%
Current GDP (2023): $2.12 trillion
Brazil is a South American country. It had a budget deficit of 7.118% of its GDP in 2023 and a current GDP of $2.12 trillion during the same year. Brazil ranks 14th on our list of countries with the largest budget deficit as a percentage of GDP.
13. Saint Vincent and the Grenadines
General government net lending/borrowing (2023) (Percentage of GDP): -7.617%
Current GDP (2023): $1.04 billion
Saint Vincent and the Grenadines is the 13th country with the largest budget deficit as a percentage of GDP. It is an island country situated in the Eastern part of the Caribbean Sea. The country had a budget deficit of 7.617% of its GDP in 2023, and its GDP amounted to $1.04 billion the same year.
12. Iraq
General government net lending/borrowing (2023) (Percentage of GDP): -7.671%
Current GDP (2023): $254.99 billion
Ranking 12th is Iraq. It had a budget deficit of 7.671% of its GDP in 2023. Iraq had a GDP of $254.99 billion during the same year. It is a Southwestern Asia Country.
11. Pakistan
General government net lending/borrowing (2023) (Percentage of GDP): -8.062%
Current GDP (2023): $340.64 billion
Pakistan is a South Asian country with a current GDP of $340.64 billion in 2023. Pakistan faces the challenge of being a country with a budget deficit. It had a budget deficit of 8.062% of its GDP in 2023 and ranks 11th on our list.
10. United States
General government net lending/borrowing (2023) (Percentage of GDP): -8.239%
Current GDP (2023): $26.95 trillion
The United States ranks as the 10th country with the largest budget deficit as a percentage of GDP. It is a North American country and a federal republic of 50 states. The country had a budget deficit of 8.239% of its GDP in 2023.
9. Maldives
General government net lending/borrowing (2023) (Percentage of GDP): -8.608%
Current GDP (2023): $6.98 billion
Maldives is an island country situated in the Indian Ocean. It ranks 9th on our list of countries with the largest budget deficit as a percentage of GDP. Maldives had a budget deficit of 8.608% of its GDP in 2023. The current GDP of Maldives was $6.98 billion during the same year.
8. Algeria
General government net lending/borrowing (2023) (Percentage of GDP): -8.609%
Current GDP (2023): $224.11 billion
Algeria had a current GDP of $224.11 billion in 2023. It is a North African country that faces the challenge of being in a budget deficit. The country had a budget deficit of 8.609% of its GDP in 2023.
7. India
General government net lending/borrowing (2023) (Percentage of GDP): -8.768%
Current GDP (2023): $3.73 trillion
India is another South Asian country that ranks 7th on our list of countries with the largest budget deficit as a percentage of GDP. India consists of 28 states and 8 union territories and had a GDP of $3.73 trillion in 2023. India’s budget deficit for the same year was 8.768% of its GDP.
6. Vanuatu
General government net lending/borrowing (2023) (Percentage of GDP): -9.167%
Current GDP (2023): $1.17 billion
Vanuatu ranks 6th on our list of countries with the largest budget deficit as a percentage of GDP. It had a GDP of $1.17 billion in 2023, and the country’s budget deficit for the same year was 9.167% of its GDP.
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Disclosure: None. 20 Countries with the Largest Budget Deficit as a Percentage of GDP is originally published on Insider Monkey.