The debt-to-GDP ratio compares a nation’s total debt to its economic production, as measured by its GDP, and is a straightforward yet effective metric. It gives a quick picture of a country’s debt load in proportion to the size of its entire economy and is given as a percentage.
A crucial economic indicator, the debt-to-GDP (gross domestic product) ratio offers important clues about the fiscal health and economic stability of a nation. It acts as a benchmark for determining how well a country can handle its debt commitments in light of the size of its economy.
Global investors often consider a nation’s debt-to-GDP ratio when making investment decisions. A lower ratio is more attractive to investors as it indicates a lower risk of default, which can result in lower interest rates on government bonds.
