- Government debt in advanced economies will reach $75.8 trillion by end of 2026, Fitch reports
- Developed markets to add $4.2 trillion in debt during 2026, totaling 104% of combined GDP
- US to have largest 2026 deficit at 7.8% of GDP, with major economies also posting large deficits
Government debt across the world's advanced economies is expected to reach a record $75.8 trillion by the end of 2026, as persistent fiscal deficits, geopolitical uncertainty, and rising public spending continue to strain national budgets, according to a report from Fitch Ratings.
The credit ratings agency estimates that developed market governments will add $4.2 trillion in debt during 2026 alone.
As a result, total government debt across these economies is projected to equal 104% of combined gross domestic product (GDP). Two decades ago, the same figure stood at approximately $26 trillion, representing about 68% of GDP.
Largest Economies Continue To Drive Debt Growth
Fitch expects the 10 biggest developed economies to account for around $69 trillion of total government debt by the end of 2026. Collectively, their debt burden is forecast to reach 114.5% of GDP, underlining the significant role major economies play in the global rise in sovereign borrowing.
Among them, the United States is projected to record the largest government budget deficit in 2026 at 7.8% of GDP, equivalent to roughly $2.5 trillion.
Other major developed economies are also expected to post sizeable fiscal deficits:
France: 5.0% of GDP
United Kingdom: 4.8% of GDP
Germany: 3.7% of GDP
Japan: 3.1% of GDP
Global Crises Have Accelerated Debt Accumulation
Fitch noted that government debt has steadily increased over the past two decades as countries responded to a series of major global disruptions.
The agency identified several events that significantly expanded public borrowing, including the global financial crisis, the eurozone debt crisis, the COVID-19 pandemic, Russia's invasion of Ukraine, and the ongoing conflict involving the United States and Iran.
According to the report, each successive crisis has left governments with higher debt levels than before, creating a long-term upward trend in sovereign borrowing.
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Rising Spending Pressures Add to Fiscal Challenges
Beyond crisis-related spending, governments are also dealing with structural financial pressures that are expected to keep borrowing elevated. These include:
Increased defence spending
Ageing populations and higher pension costs
Climate change adaptation investments
Rising interest payments on existing debt
Fitch estimates that European countries could increase defence spending by an average of 0.6% of GDP between 2025 and 2029, further adding to budget pressures.
Higher Debt Raising Market Risks
The ratings agency also warned that growing debt levels could increase financial market risks.
Although yields on 10-year government bonds in major economies have eased slightly since peaking during the recent U.S.-Iran conflict, they remain around 51 basis points higher than levels seen before the conflict began.
Higher borrowing costs could make it more expensive for governments to finance future spending and refinance existing debt.
US Debt Expected to Rise Further by 2030
Looking beyond 2026, Fitch expects the United States' debt burden to continue rising.
The agency forecasts that the country's debt-to-GDP ratio will increase from around 120% in 2026 to 131.5% by 2030.
Japan is expected to maintain the highest debt ratio among major developed economies despite a slight decline, with government debt projected to remain close to 192% of GDP by the end of the decade.
AI Could Improve Growth but Brings Fiscal Risks
Fitch also highlighted the potential impact of artificial intelligence on long-term public finances.
The agency believes AI could strengthen economic growth and improve debt sustainability, particularly in the United States, by increasing productivity.
However, it cautioned that widespread AI adoption may also lead to job displacement, resulting in higher government spending on social support while reducing tax revenues if employment levels weaken.
As governments continue to balance economic growth, security priorities, and social spending, Fitch's latest outlook suggests that managing rising debt will remain one of the defining fiscal challenges for developed economies over the coming years.
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