Debt-to-GDP Ratio

Comparing debt with GDP gives a sense of how manageable a country's debt is, since GDP reflects the economy's capacity to generate income and tax revenue.

For example, a country with government debt of 900 billion and GDP of 1,200 billion has a debt-to-GDP ratio of 75%.

The ratio can fall in two ways: by reducing debt, through budget surpluses, or by growing the economy faster than the debt. Inflation can also reduce the ratio, because it raises nominal GDP while existing debt stays fixed in money terms.

There is no single safe level. Some countries have managed debt well above 100% of GDP for long periods, especially those that borrow in their own currency and have deep financial markets, while others have faced crises at much lower levels. What matters includes who holds the debt, the interest rate paid, the currency it is in, the average time until it must be repaid, and the economy's growth prospects. The ratio is widely used by investors, credit rating agencies and international organisations to assess fiscal sustainability.