Developed Economies' Government Debt To Reach Record $75.8 Trillion By End-2026: Fitch

Government debt across developed economies is expected to reach a record $75.8 trillion by the end of 2026, with total debt rising by $4.2 trillion this year alone, according to Fitch Ratings.

The agency said debt will amount to 104% of combined gross domestic product (GDP), compared with $26 trillion, or 68% of GDP, two decades ago, reflecting a sharp rise in sovereign borrowing.

The agency expects the 10 biggest developed economies to make up $69 trillion of the total debt pile by the end of 2026, with their combined debt reaching 114.5% of GDP. Much of the increase is being driven by governments continuing to spend more than they collect, even as defence costs rise and geopolitical uncertainty adds fresh pressure on public finances.

Which Countries Are Running The Biggest Deficits?

Among the major advanced economies, the United States is expected to record the widest budget gap this year. Fitch estimates the country's fiscal deficit will reach 7.8% of GDP, or roughly $2.5 trillion, keeping it well ahead of its peers.

Other large economies are also expected to record sizeable deficits. France is forecast to run a deficit of 5% of GDP, followed by the United Kingdom at 4.8%, Germany at 3.7%, and Japan at 3.1%.

Fitch said today's debt levels are the result of one crisis after another. Countries borrowed heavily during the global financial crisis, followed by the Eurozone debt crisis and the pandemic. More recently, Russia's war in Ukraine and the conflict involving the U.S. and Iran have added fresh pressure on government finances.

Rising Spending Continues To Pressure Budgets

Even without major crises, governments are finding it harder to balance their books. Defence budgets are rising, populations are getting older, climate-related investments are becoming unavoidable, and higher interest rates have made servicing existing debt more expensive. Fitch estimates European defence spending could increase by an average 0.6% of GDP between 2025 and 2029.

The ratings agency also warned that higher debt is increasing market risks. While 10-year government bond yields have eased slightly since their recent peak during the U.S.-Iran conflict, they remain around 51 basis points above pre-conflict levels.

Looking ahead, Fitch expects the U.S. debt-to-GDP ratio to rise from about 120% in 2026 to 131.5% by 2030. Japan's ratio is expected to ease slightly but remain the highest among major developed economies at nearly 192%.

Meanwhile, India’s debt-to-GDP ratio has moderated to 58.2% in FY26, while capital expenditure continues to increase.

Fitch said artificial intelligence could help economies grow faster by lifting productivity, which may make rising debt easier to manage, particularly in the United States. At the same time, it warned that if AI displaces workers, governments could end up spending more on social support while collecting less in tax revenue.

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