Who’s Seeing Red in 2003?

Data Source: International Monetary Fund. Concept and copyright © 2003 by The Globalist

Surprisingly, China is running a budget deficit of 5.3%, more than the United States (4.6%) and the euro area countries. However, there are other significant Asian economies — Japan (7.4%), Taiwan (6.5%) and Malaysia (5.4%) running even larger deficits.

Not only is Japan running the highest budget deficit among industrialized countries at 7.4%, but its 2003 deficit approaches its 30-year high of 7.7%, a record set just the year before. Despite its former reputation for fiscal responsibility, Japan has not recorded a surplus since 1992.

Increased government spending was used to recover from the 1997-1998 Asian financial crisis. In the process, Malaysia's budget deficit has increased from 1.8% of GDP in 1998 to 5.4% in 2003. Malaysia's prime minister has vowed to cut government spending by 1.6% in 2004, but the move could keep Malaysia from meeting its growth targets.

In Asia, Singapore is doing well, running a 4.5% budget surplus. In Europe, the Scandinavian countries have the largest surpluses — with Norway (12.5%) ahead of Finland (1.8%), Denmark (1.8%) and Sweden (1.4%). New Zealand (1.9%), Canada (1.4%) and Australia (0.5%) round out the governments that find themselves in the black.

Due to the influence of large economies like France and Germany, the euro area countries on average have a 2.4% budget deficit. Adding the non-euro member states of the EU — the United Kingdom, Sweden and Denmark — reduces the overall EU average slightly to a 2.3% deficit. However, the budget surpluses in Sweden (1.4%) and Denmark (1.8%) are nearly offset by the United Kingdom's 2.6% deficit.

Countries that are members of the European Monetary Union are bound by the Stability and Growth Pact (SGP) to maintain budget deficits of less than 3% of GDP. Among the 12 euro-area countries, Portugal (-3.9%), Germany (-3.6%) and France (-3.5%) are effectively in violation of the SGP, which could result in the imposition of fines.

In the United Kingdom and United States, budget figures do not yet account for the cost of military action in Iraq. The U.S. fiscal deficit will likely exceed its current 4.6% figure when these costs are factored in.