6 out of 10 countries with highest national debt-to-GDP ratio are EU nations

The debt-to-GDP ratio has emerged as a vital metric for determining economic prospects for a given country. Most countries usually strive to put in place measures to keep their ratio as low as possible.

Data presented by Buy Shares indicates that among the top ten countries with the highest National-to-GDP ratio, the European Union accounts for six. Japan has the highest ratio at 268.21 percent. Greece and Italy hold the second and third slots at 214.29 percent, and 156.92 percent respectively.

The research indicates that the US has the fifth-highest debt-to-GDP ratio at 136.69 percent. The United Kingdom lies in the tenth slot with a ratio of 100.87 percent.

The National Debt-to-GDP ratio metric compares a country’s debt to its gross domestic product (GDP). The ratio reliably indicates the ability of a particular country to pay back its debts. The ratio can also be interpreted as the number of years needed to pay back the debt. When a country defaults on its debt, it often triggers financial panic in domestic and international markets alike.

The higher a country’s debt-to-GDP ratio climbs, the higher its risk of default on debts becomes. Although governments strive to lower their debt-to-GDP ratios, it can be challenging especially during periods of economic recession like the impact of the coronavirus pandemic. In such situations, governments usually increase borrowing in an effort to stimulate growth and boost aggregate demand.

Notably, Japan’s high debt can be managed since it is majorly owed to its citizens. Countries like Greece, owe their debt mostly to foreign creditors. In this case, Japan has the lowest risk of default compared to Greece. 

(WBJ)