The issue of public debt is a recurring theme in public debates and political campaigns, but public actors rarely interpret the differences between the economic terms that arise, thus misleading voters. We show the change in nominal GDP and the public debt to GDP ratio in EU member states between 2013 and 2023 and why it is more relevant to judge debt levels in relation to GDP.
According to the Google Trends database, since 2010, the term “public debt” was the most searched for in Hungary in the run-up to the three parliamentary elections held following the sovereign debt crisis in Europe in 2012.
The figure can be referenced here: https://public.flourish.studio/visualisation/23320385/
In the midst of political battles, the question of nominal public debt is regularly raised. However, the assessment of the financial sustainability of public debt is not based on the actual volume of debt but on its ratio to annual gross domestic product. Just as ten years ago a thousand forints was worth more than a banknote of the same denomination today, an increase in the nominal value of public debt does not mean that the overall burden of repaying it is higher. The ratio of public debt to GDP is a better way of assessing sustainability because it takes into account the value generated by the country’s population.
An illustrative example of the ratio of public debt to gross domestic product is the case of two borrowers with different incomes: a borrower with a monthly income of HUF 200,000 who takes out a loan of HUF 100,000 is more indebted than a borrower with a million-euro income who takes out a loan of HUF 300,000. As the graph below shows, Hungary is right in the middle of the nominal public debt ranking, in 13th place. In the third quarter of last year, the combined debt of the 27 member states of the European Union amounted to nearly €14,500 billion, of which Hungary’s debt of €153 billion accounted for 1 per cent.
The figure can be referenced here: https://public.flourish.studio/visualisation/23320775/
The figure can be referenced here: https://public.flourish.studio/visualisation/23320854/
By contrast, in the debt-to-GDP ratio, Hungary was ranked 19th in the third quarter of 2024 (the latest data available from Eurostat), at the top end of the bottom third. The most recent annual data available are for 2023, and the last graph shows the change in public debt over the previous decade, both in nominal terms and as a share of GDP. The value of Hungarian public debt in euro terms increased by 83% over the ten years between 2013 and 2023, the ninth highest rate of the 27 EU member states (upper middle range). Over the period under review, Hungarian nominal public debt increased by €65.2 billion (nearly 83%), while its ratio to GDP fell by 3.8 percentage points (nearly 5%). Six countries from the Central and Eastern European region outrank us in the EU ranking in terms of public debt, with Romania and Bulgaria recording nominal public debt growth rates of around 2.3-2.4 times, while Estonia’s growth rate is three times higher than Hungary’s.
The figure can be referenced here: https://public.flourish.studio/visualisation/23321041/
