Debt-to-GDP Ratio

(redirected from Debt to GDP Ratios)

Debt-to-GDP Ratio

A ratio of a country's national debt to its GDP. The debt-to-GDP ratio is one way to estimate whether or not a country will be able to repay its debt. The higher the ratio is, the more likely a country is to default because its government has borrowed too much relative to the ability of the country as a whole to repay. This may affect the country's sovereign credit rating. However, this ratio is not the only metric used. For example, the United States and the United Kingdom maintain national debts that approach 100% of GDP, but both have AAA credit ratings because the political risk in both countries is very low.
References in periodicals archive ?
At current levels, Namibia's debt remains amongst the countries with the lowest debt to GDP ratios in the world.
Even those who greet unprecedented debt to GDP ratios with the 'this time is different' argument should concede that this ratio, which is three times the level that applied in 1945-65, should be at the upper end of the debt levels that the Australian economy can sustain.
Minsky emphasised the importance of the debt to GDP ratio as the key indicator of financial fragility; while the Circuit School's insights enabled the development of a purely monetary model of the economy in which changes in debt play a crucial role in determining the level of aggregate demand.
Australia's overall debt to GDP ratio fell slightly during the recession of the 1990s--from 85 to 79 per cent--as deleveraging by businesses more than offset the increase in mortgage debt from the comparatively low base of 20 per cent of GDP.
When the debt to GDP ratio is small, so too is the contribution that an increase in debt can make to demand, and changes in debt are relatively unimportant.
As the private debt to GDP ratio rose from under 50 per cent of GDP back in 1970s to three times that today, the share of aggregate demand that came from an increase in debt rose from as little as 4 per cent in 1972 to as much as 19 per cent in 2007-8.
as in all other post-1970 recessions, the debt to GDP ratio could increase after the crisis.
5% from its pre-election lows, underpinning lower public debt to GDP ratios.