ASsignment #03

PUBLIC ECONOMICS

SUBMITTED TO: DR. FAIZA AZHAR KHAN

Submitted By: Esha Ghazanfar
DEPARTMENT: ECONOMICS
2021-B.ECON-013
Critically evaluate fiscal performance of any country for the period 1980-2020 by plotting
graphs and explain 1) fiscal deficit, 2) tax revenues as percentage of GDP, 3) Government
expenditures as percentage of GDP, 4) public debt as percentage of GDP.

Country: Japan
Tax revenue as percentage of GDP

The data shows tax revenue as a percentage of GDP for various years from 1980 to 2020. Tax
revenue refers to the income that governments collect from individuals and businesses through
various forms of taxation, such as income tax, corporate tax, sales tax, and others. Here's an
interpretation and analysis of the trends based on the data:
1980s to early 1990s
- Tax revenue as a percentage of GDP generally increased gradually during the 1980s and early
1990s. This period saw governments expanding their tax bases and increasing tax rates to
generate revenue for public spending.
- There were fluctuations, but overall, there was a trend towards higher tax revenues as a
percentage of GDP, reflecting broader economic growth and increased taxation efforts.
1990s
 - Tax revenues remained relatively stable during the early to mid-1990s. Governments
continued to refine tax policies but generally maintained tax revenue levels as a percentage of
GDP.
- Towards the late 1990s, there was a slight increase in tax revenue as a percentage of GDP,
possibly driven by economic growth and improved tax compliance.
2000s
- Tax revenue showed variability during the early 2000s, influenced by economic conditions
and changes in tax policies. Overall, tax revenue as a percentage of GDP remained relatively
stable.
- The global financial crisis in 2008-2009 temporarily impacted tax revenues as economic
activity slowed, leading to reduced tax receipts in some countries.
2010s
- Tax revenues as a percentage of GDP generally stabilized or showed modest changes during
the 2010s. Governments focused on maintaining tax revenue levels to support public finances
and manage deficits.
- There were regional variations, with some countries implementing tax reforms to enhance
revenue collection and others adjusting tax rates in response to economic conditions.
2020 and Beyond
- In 2020, tax revenue as a percentage of GDP remained at 33.00%, consistent with previous
years. This indicates that despite economic disruptions caused by the COVID-19 pandemic, tax
policies and revenue collection efforts remained steady.
The data on tax revenue as a percentage of GDP provides insights into government revenue
trends over several decades. Stable or increasing tax revenues generally reflect economic growth,
effective tax administration, and sustainable fiscal policies. Understanding these trends helps
policymakers assess the adequacy of revenue sources, plan fiscal budgets, and support economic
development through consistent public finance management.

Govt Expenditure as percentage of GDP

The data shows government expenditure as a percentage of GDP for various years from 1980 to
2020. Government expenditure represents the total spending by the government on goods and
services, social programs, infrastructure, defense, and other public goods and services. Let's
analyze the trends based on the data:
- Government expenditure as a percentage of GDP was relatively high in the early 1980s,
peaking at 44.66% in 1980. This period included increased spending on defense and social
programs.
- Throughout the 1980s and early 1990s, government expenditure remained relatively stable
but gradually declined, reflecting efforts in some countries to control fiscal deficits and reduce
public spending.
1990s
- The early 1990s saw a gradual decrease in government expenditure as a percentage of GDP.
This trend was influenced by economic reforms, privatization efforts, and fiscal consolidation
measures in many countries.
- Towards the mid-to-late 1990s, government expenditure stabilized at lower levels compared
to the 1980s, indicating a period of fiscal discipline and economic stability.
2000s
 - Government expenditure as a percentage of GDP remained relatively stable during the early
2000s. This period was characterized by moderate economic growth and, in some regions,
prudent fiscal policies.
- Around the mid-2000s, there was a slight increase in government expenditure, possibly
driven by increased spending on social programs, infrastructure, and healthcare.
2008-2009 Financial Crisis
- Government expenditure increased significantly in 2008-2009 as countries implemented
stimulus packages and increased spending to mitigate the impact of the global financial crisis.
This resulted in a temporary spike in government expenditure as a percentage of GDP.
2010
- In the aftermath of the financial crisis, government expenditure remained elevated in many
countries as governments continued to support economic recovery efforts and address social
needs.
- The expenditure levels fluctuated slightly but generally remained above pre-crisis levels
throughout the decade.
2020 and COVID-19 Pandemic
- Government expenditure spiked again in 2020 due to the economic fallout from the COVID-
19 pandemic. Governments worldwide increased spending on healthcare, unemployment
benefits, business support, and economic stimulus packages to cushion the impact of lockdowns
and reduced economic activity.
Implications of Government Expenditure Trends:
Economic Stimulus: High government expenditure during economic downturns can stimulate
economic growth by increasing demand for goods and services.
Fiscal Sustainability: Persistent high levels of government expenditure as a percentage of GDP
can lead to concerns about fiscal sustainability, particularly if it results in large budget deficits
and increased public debt.
Policy Responses: Government expenditure reflects policy priorities such as social welfare,
infrastructure development, defense, and healthcare. Changes in expenditure patterns over time
reflect shifting government priorities and responses to economic conditions.
The trends in government expenditure as a percentage of GDP illustrate how governments
allocate resources over time to meet various economic and social objectives. Understanding
these trends helps in assessing fiscal policies, economic stability, and the overall health of
national economies. It also provides insights into how governments respond to economic crises
and societal needs through changes in public spending.
Public debt as percentage of GDP

let's analyze the trends based on the data you provided:

1980s to early 1990s:

Public debt as a percentage of GDP was relatively moderate, ranging from approximately
47.84% in 980 to 92.53% in 1995. During these years, debt levels were relatively stable, with
some fluctuations due to economic conditions and policy decisions.
Late 1990s
Debt levels started to decrease gradually from the mid-1990s onwards. This period coincided
with economic growth and sometimes fiscal austerity measures in some countries, leading to a
decline in debt-to-GDP ratios.
2000s:
The trend of decreasing debt continued into the early 2000s, reflecting favorable economic
conditions and sometimes fiscal discipline in managing government finances.
2008-2009 Financial Crisis
 Public debt levels began to rise sharply around this period due to increased government
spending to stimulate economies affected by the global financial crisis. Debt levels continued to
increase in subsequent years as governments took on additional debt to support economic
recovery efforts.
2010s
Debt levels remained elevated throughout the decade, reflecting both the lingering effects of the
financial crisis and new challenges such as sovereign debt crises in some regions of the world.
2020s
Public debt surged further in 2020 due to the economic impact of the COVID-19 pandemic.
Governments increased spending to support health systems, provide economic relief to
individuals and businesses, and stimulate economies affected by lockdowns and reduced
economic activity.
Trends and Implications:
Economic Conditions: High public debt-to-GDP ratios can indicate economic challenges or
fiscal policies aimed at managing crises or stimulating growth. However, sustained high levels of
debt can also raise concerns about fiscal sustainability and future economic stability.
Policy Responses: Governments often increase borrowing during economic downturns to finance
stimulus packages and support social safety nets. This can temporarily increase debt levels but is
intended to mitigate the impact of economic crises.
Long-term Implications: Persistent high public debt levels may lead to higher interest payments,
crowding out other government expenditures, and potentially limiting fiscal flexibility in the
future.
The data on public debt as a percentage of GDP provides a snapshot of how governments
manage their fiscal policies over time. It reflects economic cycles, policy responses to crises, and
long-term fiscal sustainability challenges. Understanding these trends helps policymakers,
economists, and investors assess the financial health of countries and anticipate potential risks or
opportunities in the global economy.

Fiscal deficit percentage of GDP

let's analyze the trends based on the data:
1980s to early 1990s:
The fiscal deficit was generally moderate, ranging from around -4.42% to 1.95% of GDP.
During this period, deficits were mostly manageable, although some years saw deficits
approaching 0 or even small surpluses.
1990s:
The deficit started to widen in the early 1990s, peaking at -10.05% of GDP in 1998. This period
was marked by economic challenges and fiscal pressures.
2000s
The deficit remained substantial throughout the early 2000s, with several years showing deficits
above 6% of GDP. The global financial crisis in 2008 led to an increase in deficits as
governments worldwide responded with stimulus packages and increased spending.
2010s:
 Deficits remained elevated in the aftermath of the financial crisis, peaking at -9.69% of GDP in
2009. As economies recovered, deficits started to decline but remained significant, often above
3% of GDP.
2020
The fiscal deficit spiked to -8.97% of GDP in 2020 due to the economic impact of the COVID-
19 pandemic. Many governments increased spending to support their economies through
lockdowns and reduced economic activity.
Trends and Implications
Economic Conditions: High deficits often indicate economic challenges or government policies
aimed at stimulating growth or managing crises. The data reflects periods of economic
downturns (like the early 1990s and 2008-2009) where deficits widened significantly.
Policy Responses : Governments may use deficits strategically to support economic growth
during recessions or to finance infrastructure and social programs. However, persistent high
deficits can lead to concerns about debt sustainability and future economic stability.
Long-term Trends: The data shows variability in deficit levels over time, influenced by
economic cycles, policy decisions, and external shocks (like financial crises or pandemics).
The fiscal deficit data you've plotted reflects the financial health of the government relative to its
economic output over the past four decades. It illustrates periods of economic stress, policy
responses, and the impact of global events on national finances. Understanding these trends helps
in assessing economic policy effectiveness and fiscal sustainability over time.

Conclusion
Japan has consistently spent more money than it earns through taxes and other revenues,
resulting in ongoing fiscal deficits. This situation has led to a significant accumulation of public
debt relative to the size of its economy (GDP). Even though Japan collects a stable amount of tax
revenue each year (about 33% of GDP), the government's spending has often exceeded this
income, especially during economic downturns like the global financial crisis and the COVID-19
pandemic. To address economic challenges and support growth, Japan has ramped up spending
on healthcare, pensions, and infrastructure. However, sustaining this level of expenditure while
managing its large debt burden is a major concern. Looking ahead, Japan needs to strike a
balance between promoting economic growth and adopting effective fiscal policies to ensure its
long-term economic stability in an uncertain global environment.

End