The world is in the midst of a seemingly unending sovereign debt crisis with many nations either unwilling or unable to control government spending. One measure that investors might use to track these expenditures on a global basis is government spending expressed as a percentage of GDP.

TUTORIAL: Economic Indicators: Gross Domestic Product (GDP)

In 2017, according to World Bank data, major countries with the highest government spending levels as a percentage of GDP are spread across the globe, and include some of the wealthiest nations in Europe, along with one of the world's poorest countries. The country with the highest percentage was Djibouti at 32.44%, and the lowest value was Haiti at 3.58%. Ranked sixth is Sweden, and Saudi Arabia was ranked eighth.


Djibouti's economy is beginning to show signs of acceleration, according to The World Bank. It is a small country with grown of just over 4% in 2017 and 6% in 2018. In 2019, output is expected to increase by 7% because of political changes in Ethiopia that should improve international trade and a 15% devaluation of the Ethiopian birr that occurred in October 2017.

The transportation and logistics industy and food processing and construction materials industries should benefit from increased trade. The government is positioning the country as a regional trade, logistics, and digital hub, which is improving the medium-term economic outlook.

GDP growth of 7% is predicted for 2019 and 8% in 2020 to 2023.


Zimbabwe is ranked second on the list for the highest government spending as a percent of GDP. The government of Zimbabwe recently announced Transitional Stabilization Programme 2018 to 2020 to try to stem liquidity challenges that have caused market exchange rates to skyrocket. The government also hopes the program will reduce inflation and attract foreign direct investment. To improve trade to boost economic growth, in 2017, Zimababwe initiated an "open for business" campaign to encourage private sector investment.

Zimbabwe has an unsustainable fiscal deficit that grew from 8.5% in 2016 to 15.2% in 2017. The deficit is expected to be higher in 2018. The government is financing the fiscal deficit through domestic borrowing from both commercial banks and the Central Bank.

In 2018, the country experienced low levels of economic growth—around 3%, down from 3.2% in 2017. The country may suffer from a drought in 2018/2019 caused by El Nino. Also, the number of food insecure people is expected to increase in 2018 and 2019. The government must also invest in measures to prevent a cholera outbreak.

European Countries

The biggest spenders in Europe are Sweden (26%), Denmark (25%), and The Netherlands (24%).

Although Sweden, Denmark, and the Netherlands are at the top of the list, this does not necessarily mean that investors should avoid putting money to work here, as all three countries have AAA sovereign debt ratings from Standard and Poor's and the other major ratings agencies.

The lack of any relationship between investment quality and government spending as a percentage of GDP is demonstrated by examining Switzerland and Albania. These two countries spend the least amount as a percentage of GDP, and yet Switzerland has a AAA sovereign rating, and Albania has a B+ rating.

United States

As of April 2018, according to Reuters, Moody's rating agency gave the United States a AAA rating based on economic strength despite increasing trade tensions between the United States and China. Tax cuts that became law in December of 2017 were expected to cause a sharp increase the U.S. deficit but the growing economy should counterbalance any fiscal weaknesses.

The Bottom Line

Government spending as a percentage of GDP is a simple metric that some use to assess government spending across the globe. One weakness of this measure is that it considers only the expense side and ignores government revenues generated through taxation and other methods. The government spending as a percentage of GDP, in conjunction with other metrics, reflects government spending more accurately. (For related reading, see What Is Fiscal Policy?)