Government Expenditure

Government Expenditure in Cambodia

Cambodia's government expenditure as a percentage of GDP, although low in absolute terms at the turn of the century, has been consistently climbing since 2002. As a whole, low income and ASEAN cohorts have failed to catch up with lower-middle income cohort. We put forth that this is a consequence of tax revenue lost to corruption.

Compared to the ASEAN cohort, Cambodia has had an overwhelmingly positive development in increasing government expenditure, suggesting governance is improving.

Further, we can draw comparisons between Cambodia and lower-middle income cohort by looking at ASEAN countries. Despite government expenditure percentages being lower for ASEAN countries, growth rates have been similar between the two cohorts, suggesting other factors at play. One example could be the explosive growth of trade in ASEAN countries (see our discussion of trade).

What is Government Expenditure?

Government expenditure includes government consumption, investment, and transfer payments. Such expenditure is closely related to industrial policy, which is strategic investments into human capital and technology.

To understand the extent of government's spending, we often look at government expenditure as percentage of GDP. This allows us to put the expenditure amount in perspective, both in the context of the size of the economy in question, as well as to make it comparable with other countries.