Government debt in developed economies to hit record $75.8-trillion in 2026, Fitch says
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- Fitch Ratings projected developed-economy government debt will climb to a record $75.8 trillion by end-2026, a $4.2 trillion jump this year alone that lifts total debt to 104% of GDP, up sharply from $26 trillion (68% of GDP) two decades ago.
- The top 10 developed economies will account for $69 trillion of that total, equivalent to 114.5% of GDP, with Fitch citing the outsized role of the US and other large borrowers in driving global debt accumulation.
- The United States is forecast to post the largest budget deficit among major developed economies this year at 7.8% of GDP (~$2.5 trillion), followed by France at 5%, Britain at 4.8%, Germany at 3.7% and Japan at 3.1%.
- Fitch warned a series of shocks — the global financial crisis, eurozone debt crisis, COVID-19 pandemic, Russia's invasion of Ukraine, and the ongoing US-Iran conflict — have all contributed to a long-term ratcheting up of debt, with 10-year bond yields in major markets still about 51 basis points above pre-war levels.
- Japan's debt-to-GDP ratio will remain the highest in the group at nearly 192%, while the US ratio is projected to climb to 131.5% by 2030 from around 120% in 2026.
- European defense spending could rise by an average 0.6% of GDP between 2025 and 2029 as governments face structural spending pressures from defense, aging populations, climate adaptation, and higher interest costs.
- Artificial intelligence could boost growth and improve debt sustainability, especially in the US, but Fitch cautioned it could also drive higher unemployment, social outlays, and lower tax revenues.
Why it matters: Taxpayers and bondholders are absorbing the bill for a structural debt buildup that pushes the US deficit alone to roughly $2.5 trillion and the US debt-to-GDP toward 131.5% by 2030. With 10-year government bond yields still 51 basis points above pre-US-Iran-conflict levels, the cost of every additional dollar governments borrow is now permanently higher, raising the stakes for any future fiscal tightening or shock.
