From Double Shock to Double Recovery: Government Health Spending Trends and Outlook

The reports reveal troubling trends across low-income countries (LICs) and lower middle-income countries (LMICs), exposing serious risks to the necessary growth of public investments in health. For many countries, achieving the SDG health targets is increasingly out of reach, underscoring the urgent need for decisive action to address mounting financing challenges. With these targets at risk, the World Bank Group remains committed to helping countries deliver quality, affordable health services to 1.5 billion people by 2030 as part of our global mission to ensure a basic standard of care throughout every stage of life.

KEY MESSAGES:
Health Spending Review: Peaks, Declines, and Mounting Risks

After an early COVID-19 spending peak, per capita government health spending has steadily declined in low- and lower middle-income countries (LICs and LMICs) through 2023.

• In LICs, government spending surged to an average of US$13 per capita in 2020 but dropped to near pre-pandemic levels of approximately US$10 by 2023.
• In LMICs, spending reached an average high of US$64 per capita in 2021 before falling back to around US$55, close to 2019 levels.

The continuous declines in per capita government spending have eroded growth momentum in health investments, as health is deprioritized amid growing budgets.

• Recent declines in per capita government health spending have led to only modest annual growth of 1.2% between 2019 to 2023 in both LICs and LMICs-a sharp contrast to the pre-pandemic growth of 4.2% in LICs and 2.4% in LMICs between 2015 and 2019.
• This slowdown reflects is due to a shrinking share of health within growing government budgets, reversing the growing prioritization of health of the pre-pandemic years.
• While the overall trend is concerning, it is especially so in 35 countries-collectively representing over 2.5 billion people-where both per capita government health spending and the health share of government budgets have declined since 2019, with only a few of these countries experiencing a drop in just one of these factors.

With risks to necessary growth in government health spending mounting, urgent action is in most countries crucial to ensure the health SDGs remain attainable by 2030.

• While government health spending has lost growth momentum, levels remain well below the minimum needed to achieve the health SDGs by 2030.
• To counter these shortfalls, increasing the priority of health in government spending is crucial, alongside measures to improve spending efficiency and address overarching fiscal challenges.
• Without decisive action, countries will face serious setbacks in human capital development, poverty reduction, and economic growth, while development partners risk seeing progress stall on global priorities, including pandemic prevention and preparedness.

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KEY MESSAGES:
Health Spending Outlook: Diverging Fiscal Pressures, Uneven Constraints

Fiscal capacity varies widely across countries from 2019 to 2029, with significant differences in per capita general government expenditure.

• Among the 170 countries examined, 74 are expected to see substantial growth in real per capita general government expenditure.
• In contrast, 67 countries are projected to see sluggish growth, while 29 are anticipated to experience a contraction in per capita spending from 2019 to 2029.

This divergence in fiscal pressures is creating uneven constraints on government health spending growth, with most countries facing slowdowns relative to pre-pandemic trends.

• Whether the health share of government expenditure remains elevated or returns to pre-pandemic levels, countries with contracting general government expenditure are projected to see declines in per capita health spending by 2029, while those with stagnant fiscal space are expected to see only modest growth.
• In both cases, spending will fall well below the levels expected in the scenario where per capita government health spending grows at historical rates between 2000 and 2019.
• This situation is especially precarious for low- and lower-middle-income countries with contracting or stagnant general government expenditure, where rising interest payments on public debt further limit their ability to allocate larger shares of spending to health.

With fiscal pressures constraining necessary increases in government health spending in many countries, urgent action is essential to keep the health SDGs within reach by 2030.

• With few exceptions, current spending trajectories in LICs and LMICs-regardless of the fiscal outlook-are insufficient to reach the per capita government health spending levels needed for the health SDGs by 2030.
• A critical reassessment of financing approaches to achieve health-related SDGs is essential, with a focus on increasing the health share in government budgets, improving spending efficiency, and implementing comprehensive fiscal reforms to navigate today's macro-fiscal headwinds and multiplying development challenges.
• Without bold policy shifts, many LICs and LMICs-especially those with contracting or stagnating fiscal space-will struggle to meet the health SDGs, with far-reaching impact on health security, human capital, and inclusive economic development.

KEY MESSAGES - "Strong Advance, Early Retreat"  - June 2023

During the first two years of the COVID-19 pandemic, central government health expenditures soared in developing countries as governments began prioritizing health in their spending to combat the initial onset of the virus.

• In 2020, real per capita central government health spending grew on average by 21% (in 78 developing countries), and in 2021, it stood at 25% above 2019 levels.
• The strong advance over the first two years of the pandemic was primarily driven by governments prioritizing health in their spending. By 2021, the health share in central government spending had grown 17% since 2019.
• In contrast, general government spending rose by just 6% since 2019.

After the initial strong response to the pandemic, health spending is no longer a priority for many governments.

• In 2022, government health spending contracted, from its peak of 25% to only 13% over the 2019 baseline, bringing it close to its pre-pandemic trajectory.
• The reversal was even starker in the priority that governments gave to health. In nearly half of the countries, the central health share in general government spending fell below 2019 levels.
• In turn, in 2022, it was growth in general government expenditure spending that primarily bolstered central government health spending above 2019 levels.

Rapid action of governments will be necessary to secure the prioritization of health spending and avoid further setbacks on the path toward the health-related SDGs.

• As governments started to cut back on health spending in 2022, the Omicron variant caused another wave of COVID-19 infections and death worldwide, and many health systems struggled to cope with the backlog of non-COVID-19 services from earlier service disruptions.
• Especially in countries where the macroeconomic outlook remains concerning with limited capacity to increase government spending, the reversal in the priority given to health will affect progress toward the health SDGs.
• Government spending on health does not have to fall even when economic and fiscal space shrink, as seen during the global financing crisis 2008/09.
• To get the world on a new, pandemic-proof, sustainable development trajectory, governments need to reverse the latest trends and prioritize health in their spending.

KEY MESSAGES - "Old Scars, New Wounds" - September 2022

In the wake of the global economic shocks from the COVID-19 pandemic and the Russian invasion of Ukraine, rifts between countries in their capacity to spend on health will be growing.

• In 41 countries, government spending until 2027 is projected to remain lower than before COVID-19, restricting their ability to invest in critical areas, including health.

• In 69 countries, government spending is expected to exceed 2019 levels, but the increases will be weak.

• And in only 67 countries, government spending is projected to increase steadily through 2027.

In many countries, rising interest payments on public debt further threaten their capacity to invest in health.

• With debt levels at record highs and interest rates rising to control inflation, many governments will struggle to meet interest payments on public debt.

• Interest payments will constrain the capacity of low-income countries to spend on health on average by 7% and in lower middle-income countries by 10 % in 2027.

• The impact of interest payments varies vastly across these countries, in some of them, they are expected to constrain their health spending capacity between 15-30% in 2027.  

Without immediate action, many low- and lower middle-income countries will be left behind on the path to health and economic recovery.

• The projected decline of government spending in many low and lower-middle income countries will restrict their ability to strengthen pandemic preparedness and limit their progress towards universal health coverage.

• This will lead to growing inequalities between countries, threatening global stability, and prosperity.

• Governments need to increase revenues, give greater priority to health in budgets, and improve the efficiency and equity of health spending.

• By increasing development aid and working towards comprehensive debt solutions for low- and lower middle-income countries, high-income countries can preempt emerging threats to peace and prosperity - securing a healthier, more secure future for all.

The "From Double Shock to Double Recovery" discussion paper series examines the latest trends and outlooks in government health spending, launched in response to intensifying macro-fiscal pressures and escalating development challenges initially triggered by the COVID-19 crisis. The series also explores policy options for countries aiming to secure sustainable financing pathways toward the health SDGs amid these ongoing challenges.

The first outlook was published in March 2021 at the height of the COVID-19 crisis and included a comprehensive review of health financing policies aimed at maintaining or increasing health investments during macroeconomic downturns. A technical update, "Widening Rifts," followed in September 2021, and a second update, "Old Scars, New Wounds," was released in September 2022.

The first review of recent spending trends, "Strong Advance, Early Retreat", was published in June 2023 and provided a comprehensive analysis of government health spending trends in low- and lower-middle income countries during the pandemic response and early recovery phase from 2019 to 2022.