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22/08/2017

Top Ten Countries with most debt in 2017

We are living in a world where even some of the richest countries are struggling with their own debt and in some of them; the GDP per capita is increasing significantly from day to day. The GDP is mostly used while comparing one country to another to see the performance of the countries.

The external debt, on the other hand, is what one country owes to foreign creditors. The foreign creditors can be either individual citizens of the country, the government or corporations including international financial institutions like the World Bank or the International Monetary Fund (IMF).

Now, the question is, why do these richest economies borrow? Well, the government spends a lot more money than they take from their citizen in the form of tax so they have three options. The first option is to increase the tax, the second is to decrease the expenditure which will significantly lower the standard and will put the small businesses to end. The third and the option most of the countries are choosing are to borrow money.

According to the latest statistics, the worldwide debt is about $200 trillion and it is a seriously alarming number. The world’s debt is even three times the size of the entire global economy. However, even though almost every country in the world is in debt, there are some who don’t have this problem. For instance, Macao, The British Virgin Islands, Brunei, Liechtenstein, and Palau are living debt-free.

In order to create our list, we dug deep into documents from Treasury, CIA, IMF and World Bank to find out the debt of the countries. The list was sorted by the amount each country owes starting from the least to the country with the most debt in U.S. dollars.

We start the countdown of 10 countries that have the most debt in 2017.

10. Spain

Debt: $2.03 trillion

In terms of debt, Spain is at the tenth place with more than $2trillion debt. The debt per capita in Spain is $44,100. Even though the government believes that Spain will be out of its Excessive Debt Procedure (EDP) in two years, today Spain is one of the countries with most debt. Recovery in growth is expected although at moderate rate due to boost in private consumption and lower taxes. The Spain government has been implementing policies to improve investment and entrepreneurship. Also continuing reform of the insolvency administration, and several other measures to facilitate access to finance and the internationalization of our companies this further growth is likely to reduce the debt.

9. Ireland

Debt: $2.23 trillion

Ireland’s debt per capita is $471,000 and even though the International Monetary Fund (IMF) is expecting the Irish economy to grow by 3.5% this year, and 3.2% the year after and the borrowings are also reducing, Ireland is still one of the countries with the most debt. Recent evidence suggests the recovery of the domestic economy, improvement in consumer spending and the revival of the construction sector gaining pace. This would lead to a boost in the growth and fall in the debt.

8. Italy

Debt: $2.26 trillion

 The eighth place on our list took Italy, not only because it has a $37,900 debt per capita, but because of the overall external debt. The GDP percent in Italy is 133 and it is struggling to stay competitive internationally and it goes from bad to even worse. According to the European Commission, Italy’s GDP has risen up to 0.9% this year, and it is expected to rise by 1.1% next year. Italy is also taking the necessary steps to deal with its banking problem. The Italian parliament approved up to 20 billion euros to save its banking system. The expectation is that it will help the economy – banks will begin to lend again, and this will boost investment and spending in a country that has had essentially no economic growth since the early 2000s.

7. Japan

Debt: $3.64 trillion

The debt per capita in Japan is $26,400. The International Monetary Fund raised the growth forecast for their economy for this year, and the following 2018. The GDP growth in 2017 will be for 1.2% and 0.6% in 2018. Domestic demand contributes to the gains, with business investment improving the GDP growth and both consumption and government spending playing their parts.  But the nation is struggling with shrinking the labor force and most of the increase in the GDP came from the exports climbing high of imports. This leads to the problem to achieve the economy recovery.

6. Luxembourg

Debt: $3.93 trillion

Luxembourg’s debt per capita is pretty high because the number of citizens is pretty small. The debt per capita is $6,733,000. Even after the lower than expected growth of debt, Luxembourg is still vulnerable. It is said that the UK’s exit from the European Union has hurt Luxembourg.

5. Netherlands

Debt: $3.94 trillion

The Netherlands took the fifth place on our list, not only because it has a huge debt per capita, $234,000, but because it has a huge external debt. According to the European Commission, the Netherlands is outperforming in the average economic growth which was expected from it. The economic growth for 2017 is 2.1% and it is expected for 2018 to be 1.8%. Private consumption growth will stay solid, as wage growth picks up and unemployment declines further. Business and residential investment will remain strong, both supported by rising confidence. The Netherlands, being a major economic hub, benefits significantly from global and European trade. Stronger domestic demand and increased participation in global value chains will improve trade growth, boosting productivity and incomes. This would lead to a steady growth.

4. Germany

Debt: $5.00 trillion

The debt per capita Germany has is $61,700. At the start of the year, Germany’s economy started with 0.6% GDP growth. Germany has a solid and stable economy. German consumers had so far shrugged off the uncertainty created by Britain’s decision to leave the European Union. Government spending in Germany rose 0.8%, and household spending increased by 0.3%. Trade was a drag on GDP however, as the 3.1% growth in imports outpaced exports growth of 1.8%. It is still one of the countries that have the most external debt.

3. France

Debt: $5.10 trillion

France’s economy is the fifth largest in the world and represents around one fifth of the Euro area gross domestic product (GDP). It seems like the perfect country. Currently, services are the main contributor to the country’s economy, with over 70% of GDP stemming from this sector. But still, France is one of the countries with the weakest economies in Europe. The debt per capita in France is $75,800. Part of the problem is that austerity policies, put in place since 2011, triggered uncertainty and limited demand in the manufacturing sector. Companies invested less in the period since the crisis, hence weakening growth momentum. France’s sluggish recovery has had disastrous consequences for public finances, with French debt now close to 100 percent of GDP.

2. United Kingdom

Debt: $7.55 trillion

The United Kingdom’s debt per capita in U.S. dollars is 119,000. Even though the Chancellor George Osborne made his mission to reduce the United Kingdom’s debt by the end of the last parliament, the debt has risen in value significantly. The debt is expected to keep growing according to the Office for Budget Responsibility (OBR). Large debts may require higher rates of taxation to pay for them, limiting the Government’s ability to cut taxes and stimulate the economy. While policymakers want to increase spending in order to stimulate the economy, investors may be unwilling to loan money if the Government is already burdened by poor finances. This may also pose a problem.

1. United States

Debt: $19.23 trillion

The United States’ debt per capita is $56,000. It owes to individuals, companies and foreign governments. The United States’ debt is the greatest and since every new program and a tax cut is adding to the debt, it significantly contributed for the debt to get so large. The debt America has is bigger than everything this country produces during the whole year and it tells the investors that the country could have problems repaying the loans. One of the major factors behind the latest debt binge has been student loans, a mounting burden that can stifle economic growth by preventing Americans from buying homes or spending on big-ticket consumer items.

 

By Humneet KAUR

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