Developing Asia’s fiscal landscape and challenges

This paper analyzes how substantial fiscal policy stimulus in response to COVID-19, combined with the impact of the downturn on revenues, has severely weakened public finances in many developing Asian economies. Analysis drawing on newly compiled data shows that while tax revenues in developing Asia steadily rose in the 2 decades before the COVID–19 pandemic, they continued to lag well behind high-income economies and some developing peers. The region relies on indirect taxes, creating a relatively efficient but less progressive tax structure, while government expenditures on education and health were comparatively modest.