What ratio compares a country's public debt to its annual economic output?

The ratio that compares a country’s public debt with its annual economic output is the debt-to-GDP ratio.

It divides accumulated government debt by gross domestic product, the market value of goods and services produced in a year. The result is normally expressed as a percentage: debt equal to one year of GDP would produce a ratio of 100%.

A high ratio does not automatically mean a government is insolvent. Debt sustainability also depends on interest rates, economic growth, tax revenue, currency, and who holds the debt. Japan, for example, has historically carried a very high government-debt ratio while borrowing largely in its own currency.

A common mix-up is the deficit-to-GDP ratio. Debt is a stock accumulated over time; a deficit is a one-period shortfall added to that stock. Debt-service ratios instead measure payments such as interest and principal, while debt-to-income ratios are more commonly used for households or firms.