The Zhitong Finance App learned that the rating agency Fitch said on Tuesday that as countries continue to face fiscal deficits, geopolitical tensions, and rising fiscal spending requirements, developed economies' government debt is expected to rise to a record $75.8 trillion by the end of 2026.
Fitch said that this year alone, the size of government debt in developed economies will increase by 4.2 trillion US dollars, bringing the total debt to 104% of gross domestic product (GDP). By contrast, 20 years ago, this figure was just $26 trillion, or 68% of GDP.
Fitch estimates that the total government debt of the world's top ten major developed economies will reach 69 trillion US dollars, equivalent to 114.5% of GDP, highlighting the leading role played by the US and several other large borrowers in driving global debt accumulation.
Fitch predicts that the US will record the largest government deficit among major developed economies this year, accounting for 7.8% of GDP, or about 2.5 trillion US dollars. France's fiscal deficit is expected to account for 5% of GDP, the UK at 4.8%, Germany at 3.7%, and Japan at 3.1%.
Fitch warned that a series of shocks, including the global financial crisis, the Eurozone debt crisis, the COVID-19 pandemic, the Russian-Ukrainian conflict, and the ongoing conflict between the US and Iran, are driving global government debt to continue to rise over a long period of time.
At the same time, governments are also facing structural fiscal pressures associated with defense spending, an aging population, dealing with climate change, and increased interest spending. Fitch estimates that European defense spending will increase by an average of 0.6% of GDP between 2025 and 2029.
Rising debt levels are also increasing financial market risk. Although the yield on 10-year treasury bonds in major markets has declined somewhat since it hit a high point during the conflict between the US and Iran, it is still about 51 basis points higher than before the conflict broke out.
Looking ahead, Fitch predicts that by 2030, US government debt as a share of GDP will rise from about 120% in 2026 to 131.5%; Japan's ratio is expected to decline slightly, but it will still be the highest among major developed economies, close to 192%.
According to Fitch, artificial intelligence (AI) is expected to drive economic growth and improve the sustainability of government debt, particularly in the US. However, artificial intelligence may also lead to higher unemployment, higher social welfare spending, and weaken tax revenues.