Fitch forecasts record $75.8T developed market debt by 2026
Developed market government debt is projected to reach a record $75.8 trillion by the end of 2026, signaling sustained fiscal strain for sovereign bond investors as structural spending pressures overwhelm economic growth.
Fitch expects developed market government debt to swell by $4.2 trillion in 2026, pushing the total burden to $75.8 trillion. This will lift sovereign debt to 104% of gross domestic product, a steep acceleration from the 68% of GDP recorded two decades ago. The ten largest developed economies will account for $69 trillion of this total, hitting 114.5% of their combined GDP.
The United States remains the primary driver of this accumulation. Fitch projects the US will post the widest government budget deficit among major developed economies this year at 7.8% of GDP, equivalent to roughly $2.5 trillion. France and the United Kingdom follow with deficits of 5% and 4.8% of GDP respectively, while Germany and Japan sit at 3.7% and 3.1%.
For fixed-income investors, these figures underscore a structural shift in sovereign credit profiles. Fitch attributes the sustained rise in debt to a succession of major global shocks, including the global financial crisis, the COVID-19 pandemic, and the ongoing US-Iran conflict. More importantly, long-term spending pressures are now firmly baked into fiscal trajectories.
Governments face elevated borrowing costs alongside rising demands from ageing populations and climate adaptation measures. Defence budgets represent a particularly acute pressure point in Europe, where Fitch estimates military spending will increase by an average of 0.6% of GDP between 2025 and 2029.
The agency notes that artificial intelligence could alter this trajectory. Advances in AI might support stronger economic growth and improve debt sustainability, particularly in the US. However, Fitch warned that wider AI adoption carries a dual risk: it could trigger higher unemployment, increased social spending and lower tax revenues, ultimately creating fresh fiscal challenges.
