South-East Asia Regional Conference on Epidemiology

132 | <strong>South</strong>-<strong>East</strong> <strong>Asia</strong> <strong>Regional</strong> <strong>Conference</strong> on Epidemiology
compared the differences in spending (for education or health) with the difference in GDP growth (1).
If the ratio is positive, it means that an increase (decrease) in GDP growth is accompanied by an
increase (decrease) in spending.
Fig. 6: Long-run vs Short-run Impacts
Spending elasticity of growth
SR LR
Private health 0.91 1.02
Public health 0.73 1.15
Public education 0.19 1.09
The value of elasticity is important. For example, Wan has observed that elasticity for health is
greater than elasticity for education. As a result, a decrease in growth will affect spending for health
more significantly than for education (and if growth increases, spending for health will increase more
than spending for education) (Wan’s paper describes how elasticity is computed (1). Because elasticity
for health is greater than elasticity for education, then if a household has a reduction in income, the
household will try to maintain its expenditures on education but will decrease its health expenditures
in the short term. It is the same for the government: elasticity is very low for public education. In the
short term, if income is reduced, education expenditures will be protected (low elasticity) but health
expenditures will probably be reduced (higher elasticity). This observation is important: during an
economic crisis, governments and donors should make a conscious effort to protect health expenditures
for the poor. In the longer term, the poor will require assistance for both health and education.
4. Response to the crisis
In response to the 1997-1998 crisis, governments in <strong>Asia</strong> introduced macroeconomic and fiscal reforms
and political reforms (such as decentralization in Indonesia). The International Monetary Fund (IMF)
and other international organizations recommended to governments to control budget deficits and
reduce expenditures to re-establish investors’ confidence and bring back foreign investments.
When the present crisis hit <strong>Asia</strong>, most countries were better prepared and several of them had
sufficient resources (i.e. enough fiscal space) to rapidly implement fiscal stimulus programmes.
Governments thus have responded very differently to this economic crisis and seem to have adopted
just the opposite responses compared with their responses in 1997-1998. Governments, supported by
international organizations, have adopted counter-cyclical investment policies. They have invested in
what is called fiscal stimulus. Fiscal stimulus also covered social expenditures (Fig. 7); most countries
have protected social and health spending, with some countries (China, for example) even increasing
health spending.