Research and experimental development (R&D) expenditure in the OECD area grew by 2.4% in inflation-adjusted terms in 2023, down from 3.6% in 2022. Business R&D expenditure outpaced other sectors, growing at 2.7% in 2023 and accounted for 74% of total gross domestic expenditure on R&D (GERD) in the OECD area, up from 66% in 2010. R&D in government sector institutions grew by 2.5%, while R&D in the higher education sector saw a more modest increase of 1.7%.

At 8.7%, growth in R&D expenditure in China continued to surpass that of the OECD area, the United States (1.7%) and the European Union (1.6%) in 2023. The EU’s largest economies slowed the area’s overall growth: Germany’s R&D rose by 0.8%, while France’s fell by 0.5%. In contrast R&D in Spain and Poland increased by over 8%. Ireland’s R&D expenditure fell by 2.4% in 2023 following a major boost in 2022 from large business R&D capital projects. R&D growth in Japan (2.7%) and Korea (3.7%) exceeded the OECD average.

The gap in the level of gross domestic expenditure on R&D (GERD) between the world’s largest R&D performers – the United States and China – narrowed significantly in 2023. In purchasing power parity (PPP) adjusted USD, the standard method for international macroeconomic comparisons, China’s R&D expenditure reached 96% of US GERD, up from 72% ten years before. The gap is larger when measured in USD at market exchange rates (49% in 2023 vs 42% in 2013).

Breaking down GERD by R&D-performing sector, the United States maintains its lead for the business and higher education sectors, where China now reaches 95% and 74% of the US level, respectively. In the government sector, China’s R&D expenditure is 1.6 times that of the United States. Considering R&D funding sectors’ contributions to total R&D, China has surpassed the United States in terms of funding from domestic business enterprises, but it remains behind on funding from government and the rest of the world.

R&D intensity in the OECD area remains unchanged at 2.7% since 2020. R&D intensity is an economy size-adjusted headline measure of domestic expenditure on R&D expressed as a percentage of GDP. For the EU27, the R&D intensity also stood constant at 2.1%. Among OECD countries, Israel and Korea continued to report the highest levels of R&D intensity, at 6.3% and 5.0% of GDP, respectively. R&D intensity in China stood at 2.6% in 2023, approaching OECD area levels.

Growth in government budget allocations for R&D (GBARD) in the OECD area slowed sharply at 0.6% in 2023, down from 5.5% in 2022, as COVID-19 stimulus packages came to an end in several OECD economies. Since 2023 budgets may fund R&D performed in 2024, this slowdown may not yet have had a visible impact on 2023 R&D performance among sectors more reliant on government R&D funding. The budgetary situation in 2024 remains uncertain as several countries have not yet reported data for this year, and GBARD statistics do not yet include R&D funding provided by the EU budget. Based on data available for 10 OECD countries, this is projected to have remained stable in 2024 (0.5% increase, well below GDP growth).

Data on the orientation of government R&D budgets for the OECD area show that, in 2023, there was a decline in R&D investments in support of the objectives of health (reaching USD 87.8 billion in constant PPP in 2023) and general advancement of knowledge other than general university funds (USD 73.2 billion), which had grown the fastest during the COVID-19 pandemic. In contrast, support for energy and the environment (USD 42.6 billion) and defence (USD 107.7 billion) increased by 29.1% and 16.1%.

Source: OECD
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