Generally, government debt as a
percent of GDP is used by investors to measure the ability of a country to
repay its debt in the future, thereby affecting the country’s borrowing costs
and government bond yields. If a country fails to repay its debt, it will
default on its debt, which can cause panic in both domestic and international
markets. A high debt to GDP ratio could make it more difficult for a country to
pay external debts and may lead creditors to seek higher lending interest
rates. The higher the debt to GDP ratio, the less may the country will pay back
its debt and the higher the risk of default. While governments may try to reduce
its debt to GDP ratios, government borrowing may increase in times of war or
recession. A country is generally considered stable if it can continue to pay
interest on its debt without refinancing or undermining economic growth.
The table above shows the government debt to GDP of Denmark from year 1995 to year 2016.
Denmark recorded a government debt
equivalent to 37.70% of the country’s Gross Domestic Product in 2016. The
table above shows that the average
of government debt to GDP in Denmark
is 47.10% from year 1995 until year
2016. The government debt to GDP of Denmark is reaching an all time high of 73.20% in year 1995. The lowest record of 27.30%
in Danish government debt to GDP is
in year 2007.
The Danish government debt to GDP ratio is narrowed to 48.50% in year 2011 from 73.20% in year 1995. This
means that Denmark could pay back the external debt easily and the economic
growth will go more stable. In year 2002, the government debt to GDP ratio had a sudden rising to 49.10%. Then, there is a prolonged
downward phase of decreasing in government debt to GDP ratio on 49.10% in year 2002 until 27.30% in year 2007.
After the prolonged downward phase, the government debt to GDP ratio is rising again from year 2007 until year 2011. The GDP ratio is rising
to 46.10% in year 2011 from 27.30% in year 2007. This means that it is more
difficult for Denmark to pay back the external debts and this may lead the creditors
to seek for higher lending of interest rates. The Danish government debt to GDP ratio is narrowed again in year 2011 until year 2016. The GDP ratio is
reducing from 46.10% in year 2011 to 37.70% in year 2016. Lastly,
Denmark’s position in terms of percentage of gross domestic product has
improved in 2016 compared with the rest of the world.