Understanding National Debt: Calculating Debt to GDP Ratio

A country's national debt is the sum total of its annual deficits and surpluses over time. A deficit occurs when a country's governmental income over the course of one year is less than its expenditures. Deficits are added to the total national debt. Deficits are normally measured in relation to a country's Gross Domestic Product, which is the country's total income over the course of the year. Countries with a larger GDP can safely carry a larger debt than smaller nations.

Step 1

Look up the country's national debt in an online reference, such as the CIA World Factbook (see References), which maintains an annual list of all countries ranked by the size of their debt relative to their GDP.

Step 2

Determine the actual dollar amount of debt, if you are starting with a GDP percentage, by multiplying the percentage by the country's GDP. For example, the most indebted country in the world in 2009 was Zimbabwe, with a debt of approximately 304.3 percent of GDP. Zimbabwe's GDP was $332.1 million US, which multiplied by 3.043 yields a debt of $1.01 billion US.

Step 3

Calculate the percentage of GDP from a real dollar amount by dividing a national debt by GDP. For example, Japan's 2009 national debt was $7.955 trillion. Divide this by its GDP of $4.14 trillion for a rate of 192.1 percent, the second highest in the world.

Tip

One trillion is a million times a million, and a thousand times a billion. Japan’s GDP is therefore over 12,466 times as large as Zimbabwe’s. This is why debt relative to GDP is used, to compare nations with large differences in the size of their budgets.