Debt vs. GDP for AAA rated countries
Yesterday was a big day for the US’s credit rating, and not in a good way. Credit rating agency Standard and Poor’s downgraded the US from AAA, the highest rating, to AA+, the 2nd highest rating.
I wondered, what countries are still rated AAA, and what does their debt profile look like?
Not surprisingly, Switzerland and Germany are on the list, but I was quite surprised that the UK was still among the top-rated countries, along with Hong Kong and Norway. How does the US stack up against these countries?
Interestingly, the US is one of the few countries with a Debt-to-GDP ratio below 100%. I was quite surprised by The Netherlands and Norway above 400%.
It’s clear that both current debt-to-GDP ratio and the trajectory is important – I also looked at last year’s budget deficit for each country:
Now Norway’s credit rating makes more sense. While their in debt up to their eyeballs, they’re slowly chipping away at it, with a healthy 10% surplus each year. Meanwhile, the US is digging a hole, adding more than 10% to their debt each year.
It’s clear that the patch to solvency is getting the US budget back on track. With the current leadership on both sides, my confidence of this happening is very low.