Debt-to-GDP Ratio

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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 ?
Over the last four decades, OECD nations with lower debt-to-GDP ratios have responded to financial crises, on average, with more expansionary fiscal policy than their higher-debt counterparts.
"When I think about comparing the Philippines to other parts of the world, it has managed to do so much and grow so much while bringing its public debt-to-GDP ratios down.
"When I think about comparing the Philippines to other parts of the world, it's managed to do so much and grow so much while bringing its public debt-to-GDP ratios down.
'Lending rates are at an all-time low; the Philippines gross international reserves are hefty; its macroeconomic fundamentals are sound with declining debt-to-GDP ratios and prospective growth rate of 7-8 percent pegged for the medium-term.
A country like Saudi Arabia, although currently downgraded by Fitch, is still rated in the As and is a long way from having a serious, risky debt-to-GDP ratio. In other words, Saudi Arabia can borrow at cheaper rates than other states who have higher debt-to-GDP ratios or those that have defaulted on their debt obligations previously.
Overall, flexible exchange-rate regimes mitigate the effects of commodity export price shocks on government fiscal balances, even as those regimes lead to debt-to-GDP ratios that are more sensitive to shocks.
For Ireland and Portugal, debt dynamics look less unfavorable than for Greece, while still being very challenging - both countries will have debt-to-GDP ratios of more than 100 per cent by 2012.
In this limiting textbook case, since all countries borrow at the common equilibrium world rate, the cross sectional dispersion of countries' debt-to-GDP ratios will not help to explain the common level of the world real interest rate.
Romer find that countries with more monetary and fiscal policy options at the onset of a crisis, namely those with interest rates well above the zero lower bound and with lower debt-to-GDP ratios, recover more quickly.
The table showing estimates of the debt-to-GDP ratios was revised to reflect calculations using nominal GDP instead of previously used real (constant) GDP.
Meanwhile the debt-to-GDP ratio is projected to decline to below 40% by the end of the projection horizon.
Greece posted last year the highest debt-to-GDP ratio with 180.8 per cent of economic output followed by Italy's 132 per cent and Portugal's 130.1 per cent, Eurostat said.