Government debt across developed economies is projected to climb to a record $75.8 trillion by the end of 2026, as countries grapple with persistent fiscal deficits, rising geopolitical risks and mounting structural spending pressures, according to Fitch Ratings, as per a Reuters report.
The ratings agency estimates developed market government debt will increase by $4.2 trillion in 2026 alone, taking the total debt burden to 104% of gross domestic product (GDP). That marks a sharp rise from $26 trillion, or 68% of GDP, recorded about two decades ago.
Fitch expects the 10 largest developed economies to account for $69 trillion of total government debt, equivalent to 114.5% of GDP, underscoring the dominant contribution of major borrowers such as the United States to global debt accumulation.
Among major developed economies, the United States is forecast to post the widest government budget deficit this year at 7.8% of GDP, or roughly $2.5 trillion. France is expected to record a deficit of 5% of GDP, followed by the United Kingdom (4.8%), Germany (3.7%) and Japan (3.1%), according to Reuters.
Fitch said a succession of major global shocks, including the global financial crisis, the euro zone debt crisis, the COVID-19 pandemic, Russia's invasion of Ukraine and the ongoing U.S.-Iran conflict, has contributed to a sustained rise in sovereign debt levels.
The agency also highlighted growing long-term spending pressures from higher defence budgets, ageing populations, climate adaptation measures and elevated borrowing costs. It estimates that European defence spending could increase by an average of 0.6% of GDP between 2025 and 2029.
Rising debt levels are also increasing market risks. While 10-year government bond yields in major economies have eased from peaks seen during the U.S.-Iran conflict, they remain about 51 basis points higher than pre-conflict levels, according to the report by Reuters.
Looking ahead, Fitch projects the U.S. debt-to-GDP ratio will rise to 131.5% by 2030 from around 120% in 2026. Japan's debt ratio is expected to decline modestly but remain the highest among major developed economies at nearly 192%.
Fitch said advances in artificial intelligence could support stronger economic growth and improve debt sustainability, particularly in the United States. However, it also warned that wider AI adoption could lead to higher unemployment, increased social spending and lower tax revenues, creating fresh fiscal challenges.
