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In economics, the debt-to-GDP ratio is the ratio between a country's government debt (measured in units of currency) and its gross domestic product (GDP) (measured in units of currency per year). A low debt-to-GDP ratio indicates that an economy produces goods and services sufficient to pay back debts without incurring further debt. [1]
A healthy debt-to-GDP ratio is a far better indicator of a country’s fiscal health than the dollar amount of the debt it owes. In 1988, America’s debt was about half its GDP. Today, the ...
A country's general government debt-to-GDP ratio is an indicator of its debt burden since GDP measures the value of goods and services produced by an economy during a period (usually a year). As well, debt measured as a percentage of GDP facilitates comparisons across countries of different size.
Countries with very high debt-to-GDP ratio are considered to be more financially vulnerable during recessions, and due to it, their creditors demand higher interest rates on new loans or long-term loans with variable interest to cover the potential loses. This measure often even worsens country's budget balance and increase the risk of country ...
On the other hand, emerging markets held $105 trillion in debt, but their debt-to-GDP ratio hit a new high of 257%, pushing the overall ratio up for the first time in three years.
When properly calculated, the average real GDP growth rate for countries carrying a public-debt-to-GDP ratio of over 90 percent is actually 2.2 percent, not −0.1 percent as published in Reinhart and Rogoff.
A country's private debt can be measured as a 'debt-to-GDP ratio', which is the total outstanding private debt of its residents divided by that nation's annual GDP. A variant is the consumer leverage ratio , which is the ratio of debt to personal income.
CBO also expects the U.S. debt to GDP ratio to exceed 100% in 2021 and reach 107% in 2023, the highest in America’s history. The projected U.S. budget deficit for 2020 is $3.3 trillion (bigger ...