25 Countries with the Lowest Debt to GDP Ratios

See our explanation on other reasons for national debt, like the types of capital expenditure. 5 – The debt clock then updates every two seconds, increasing according to the figures calculated in step 2. 3 — We then work out the time difference between when the data was obtained and when the debt clock is being viewed by a visitor. With the backstop of a high return from a safe source, banks do not need to lend to businesses to make a profit.

Taking the US as an example, the federal debt and national government debt are of the same nature, since the federal government is part of the national government. Public debt, on the other hand, represents the total debt obligations of a country’s government. It includes both domestic and external debt held by the public sector, such as bonds and loans. Public debt can be used to fund government initiatives, infrastructure projects, and social welfare programs. A high public debt can lead to concerns about a country’s fiscal sustainability and potential for default.

  1. The World Bank is committed to helping countries strengthen their debt management and providing financial assistance.
  2. Public debt can be used to fund government initiatives, infrastructure projects, and social welfare programs.
  3. Many countries have been keeping their debt-to-GDP ratios low owing to their robust fiscal policies, strong economic growth, and even resilient risk management.
  4. The figure presented as a country’s national debt is the total sum which the national government owes it’s creditors.
  5. Debts and debt instruments range from the simple to the complex and their value is not independent of the structure of interest rates and difficult to measure factors such as levels of confidence.
  6. Public debt, on the other hand, represents the total debt obligations of a country’s government.

Unfortunately, these accrual standards are not applied universally so intercountry comparisons of debt to GDP ratios are flawed and lack transparency. The use of the debt-to-GDP ratio to determine the fiscal limits is controversial. The paper’s conclusion that when government debt exceeded 90 percent of GDP the rate of economic growth declines by about one percentage https://1investing.in/ point annually has been widely challenged. Furthermore, in the light of rising debt ratios, as a result of the response of governments around the world to the corona virus, the validity of target debt-to-GDP ratios has been challenged. Former IMF chief economist Oliver Blanchard has recently warned that there is no one-size-fits all “magic” debt to GDP ratio.

Visit the World Bank’s DataBank to explore the International Debt Statistics database. Russia’s debt ratio was one of the lowest in the world at 16.99% of its GDP in 2021—though the country’s war with Ukraine, which began in early 2022, will likely have some effect on this ratio. A country’s national debt is one of many economic indicators that interplay to create a judgment on a country’s prospects for success. If you are thinking of investing in a country’s economy, or if you are considering moving there, researching the national debt of that place and how the government spends money may be insightful. Despite being small, the country has a high income per capita and strong public and external balance sheets.

Do Foreign Countries Own National Debt?

When banks are less interested in offering loans, they raise interest rates for all borrowers. They don’t want to scare off those people who pay in more than they take out, and so they try to avoid increasing tax levels. Another reason for rising debt is the economic infrastructure we live in, which relies on productivity in individuals. Debt-to-fund infrastructure projects are called “capital expenditure” and are generally encouraged by investors. This is because they are likely to generate direct income or raise the productivity and GDP of the nation. For example, the United States has a debt to GDP ratio of 108% and a lot of people want to buy US Treasury bonds.

International Debt Report 2023

Thanks to economic indicators, you can work out whether a country’s national debt will trigger a virtuous cycle of investment and expansion, or a destructive debt spiral. They also look at the debt-to-GDP ratio, the national debt per head of population, the interest rates on government debt, and the average bank lending rate. Government debt is a figure that represents the money owed by a national government.

China needs to do more on ‘silent crisis’ of debt, says World Bank official

In the context of the 20 countries with the least amount of debt, analyzing their debt-to-GDP ratios can provide valuable insights into their respective economic stability and overall financial management. Paying attention to other economic indicators, such as inflation rates, unemployment rates, and the size of the informal economy, can further enrich our understanding of their debt profiles and financial health. When assessing the financial stability of a nation, a lower debt-to-GDP ratio is generally preferred, as it implies that the government has a stronger capacity to pay off its debt with the wealth generated by its economy. High debt-to-GDP ratios, on the other hand, indicate a higher risk of default and can hamper a country’s economic growth, as well as its ability to respond to financial crises. Nations with a low debt-to-GDP ratio are more likely to be able to repay their debts with relative ease. Nations whose economies struggle to produce income or which have an oversized debt tend to have a high debt-to-GDP ratio.

Coupled with rising interest rates, borrowing costs have been increasing significantly, pressing national budgets and making it increasingly difficult for countries to service their debts. Ultimately, countries with the least amount of debt should focus on their individual economic situations and diversification initiatives to maintain low debt levels while fostering long-term growth. International cooperation and leveraging strengths in various sectors of their economies can be useful in achieving these goals. Low levels of national debt may allow governments to provide various forms of subsidies and support to industries, businesses, and individuals. This not only helps to foster economic growth, but can also create employment opportunities and contribute to exports and overall economic strength. When examining countries with the least amount of debt, it is essential to understand the various tax and revenue systems that contribute to their stable economic standing.

China currently has the world’s second-largest economy and the largest population, with approximately 1,425,821,667 people. This guide explains what national debt is and what a country’s national debt figures represent. We explain what a debt-to-GDP ratio means and explore which countries have the highest and lowest national debt-to-GDP ratios in the world. Australia enjoys a low debt-to-GDP ratio owing to its prudent fiscal management policies and generally strong economic growth.

Why Is There National Debt?

Considering the global landscape, the World Bank projects that growth is expected to decelerate markedly in 2022 due to COVID-19 flare-ups, diminished fiscal support, and lingering supply bottlenecks. Low-debt countries should monitor global economic trends and implications for their economies closely, addressing potential risks and adapting to changing circumstances. It is important to note, however, that simply having low levels of debt does not automatically translate to strong social services and welfare provisions.

World Economics has also identified various ways that countries can improve the quality of economic statistics, potentially increasing measured GDP which can then be used to adjust debt to GDP ratios. Despite their differences, both external and public debt are critical factors to consider when analyzing a country’s financial health. Balancing the two types of debt and monitoring their trajectories can help inform policy decisions and contribute to greater economic stability.

Adhering to these policies, governments aim to match their spending with the revenue they generate. This approach minimizes the need for borrowing and helps to keep national debt levels low. Countries that prioritize balancing their budgets tend to have fiscal discipline and are better equipped to manage and maintain low debt levels. Low levels of national debt can countries with lowest debt be attributed to various factors such as effective fiscal management, stable economic growth, and prudent government policies. These countries are often lauded for their financial responsibility and serve as a model for other nations looking to reduce their own debt levels. These ratios have an important influence, therefore, on the interest cost of servicing debt.

However, when a government spends more than its revenue in a year, it runs a budget deficit that fiscal year. Swaziland, now known as Eswatini, has had debt levels equating to 38.4% of GDP in 2021. The primary reasons for slow growth are weak agriculture sector performance, domestic demand pressures, and social and political uncertainty. The country also largely depends on South Africa for its exports and imports.

Archives prior to February, 2010 also include data in text and MS Access formats. Note that the Year column refers to the calendar year in which the database and its corresponding report were originally published. This situation creates an annual deficit that is unlikely to end until the accumulated debt becomes unsustainable and the government’s finances collapse. According to the IMF, Japan is the most indebted country in the world in terms of a debt-to-GDP ratio.

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