Developing Asia's fiscal landscape and challenges

What are the salient features of developing Asia's tax revenues and public expenditures? How do these compare with other economies and how have they been affected by the coronavirus disease (COVID-19) pandemic? To analyze these issues we assemble data across economies drawing on a range of sources to maximize temporal and coverage of economies. We find that while tax revenues in developing Asia steadily rose in the 2 decades before COVID-19, they continued to lag behind high-income economies and some developing peers. The region relies on indirect taxes, particularly consumption taxes, creating a relatively efficient but less progressive tax structure. Alongside these lower tax revenues, government expenditures on education and health were comparatively modest. Substantial fiscal policy stimulus in response to COVID-19 comprised both tax and expenditure measures which, combined with the impact of the downturn on revenues, has severely weakened public finances in many developing Asian economies.