Understanding the Debt-to-GDP Ratio

This guide compiles various viewpoints to help our WEU members stay informed about national debt discussions in public and financial media.

What Is the Debt-to-GDP Ratio?

The Debt-to-GDP ratio compares a country’s total debt to its annual economic output (Gross Domestic Product or GDP). It indicates how capable a nation is of repaying its obligations based on its production capacity.

Formula: Debt-to-GDP Ratio = (Total Debt ÷ GDP) × 100

• Total Debt: Typically government debt owed by the state.
• GDP: The total value of goods and services produced in one year.

For a deeper dive, see our Understanding Debt-to-GDP Ratio: A Simple Guide for WEU Members.

Why the Debt-to-GDP Ratio Matters

• High Ratio: Indicates a nation owes more than it produces, raising risk if growth slows.
• Low Ratio: Suggests sufficient output to manage debt, offering greater stability.

Benchmarks

• Below 60%: Generally healthy for EU and UK economies.
• Above 100%: Debt exceeds annual output; not always negative but can be risky during slowdowns.

Example Calculation

If a country has $10 trillion in debt and produces $20 trillion in GDP:

Debt-to-GDP = (10 ÷ 20) × 100 = 50%

This means the nation owes 50% of its annual economic output.

How Do Countries Manage High Debt?

1. Boost Economic Growth: Investing in infrastructure and exports raises GDP, improving the ratio.
2. Control Spending & Improve Tax Collection: Cutting waste and enhancing tax systems reduces debt pressure.
3. Moderate Inflation: Mild inflation can lower the real value of debt, though excessive levels hurt consumers.
4. Structural Reforms: Productivity enhancements and business-friendly policies drive efficiency.
5. Debt Restructuring: Negotiating new terms with creditors when in distress.
6. Debt Monetisation (Risky): Central banks may buy government bonds or print money, offering a short-term fix but risking inflation.

Debt-to-GDP Ratios in 2024: Key Countries

High Debt-to-GDP Ratios

• Japan (252.4%): Highest globally; aging population and low productivity.
• Greece (168.8%): Improving since the Eurozone crisis.
• Italy (137.3%): Faces persistent deficits under pressure to reduce debt.
• United States (121.0%): High due to sustained deficits and $34 trillion debt.
• France (110.6%): Increased borrowing for energy and living-cost support.
• United Kingdom (101.1%): Post-pandemic support measures lifted debt ratios.

Low Debt-to-GDP Ratios

• Kazakhstan (8.0%): Very low debt, strong economic position.
• Russia (19.9%): Low debt but affected by international sanctions.
• Saudi Arabia (22.0%): Oil revenue provides flexibility, reducing borrowing needs.

What This Means for Trade Union Members

• High-Debt Countries: May cut services like healthcare, pensions, and infrastructure—potentially affecting public sector employment rights and benefits.
• Low-Debt Countries: Better positioned to invest in services, infrastructure, and job creation—supporting stronger worker protections.

Looking Ahead to 2025

Early indicators show countries such as Greece and Sudan still face high debt, while Bangladesh and Kazakhstan maintain low ratios, allowing greater social investment.

Key Point: A nation’s capacity to manage debt through growth, responsible policy, and reform determines its ability to fund public services and support workers.

What the WEU Is Doing on Your Behalf

• Advocating Sustainable Economic Policies: Ensuring debt management focuses on growth and social benefits.
• Monitoring Government Spending: Preventing debt repayment from leading to cuts in essential services like healthcare and education.
• Pushing for Fair Taxation: Ensuring working people do not disproportionately bear the burden of debt.

Statements from the WEU General Secretary

Stephen Morris, General Secretary, Workers of England Union:

“By explaining the Debt-to-GDP ratio, the WEU aims to support policy changes that protect workers and ensure UK debt does not hinder growth or diminish employment rights.”

“Every nation within the UK has unique financial challenges. We push for fair taxation across all regions and remain committed to advocating for you as a worker.”

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