Japan – National Debt

Globally, Japan has one of the largest gross domestic products, making it among the largest economies in the world. 

Below is a graph analysing the trends of Japan's national debt as a percentage of their national gross GDP. In 2019, Japan had around $12.2 trillion USD in debt, which is around half the debt that the United States owes, however, in relation to the size of its economy, it is huge as it is around 240%. 

The global coronavirus epidemic has forced Japan to secure a large loan to support its citizens – for the fiscal year starting in April 2021, there will be a $1.03 trillion budget draft for the epidemic. 

Other than the global epidemic, wherein countries need to respond to their citizens' needs, Tokyo (Japan's capital) hosted the 2020 Olympics. This has caused Japan an estimated $15 billion USD. These costs included displacement costs (many Tokyo public housing were demolished to make room for the stadium). Many countries that previously hosted the Olympics also had increased costs other than the initial costs needed for hosting the games.

This current fiscal year, Japan will be issuing new Japanese government bonds (JGBs) worth approximately $1.018 trillion USD, more than double the amount in fiscal 2009 when the global financial crisis was occurring. Currently, the priority is to lessen the economic impact of the epidemic, as well support the citizens and pay COVID-related costs, however, the government is not yet thinking of how to pay the debt back. 

 

Canada - Budget and National Debt

A government's budget and debt determine how much it is able to use monetary policy to influence the economy and fund initiatives. If a government has high debt, it will find it much harder to borrow money to finance new projects and justify such spending and vice versa.

Figure 1: Canada's budget balance as a percentage of GDP

Canada's budget was at a relatively healthy level prior to the COVID pandemic, increasing steadily year on year from a budget deficit of -0.45% in 2016 to a budget surplus of 0.54% in 2019. This is an extremely healthy level for the government budget to be in, putting the Canadian government in a good position to create new initiatives and borrow money if needed in a crisis.

Conveniently, such a crisis came along in the form of COVID, pushing the Canadian economy into a recession, with the nation's unemployment spiking to 13.5%. Social distancing rules restricted economic activity and many companies considered mass layoffs of workers.

In response to the pandemic, Canada has created large spending programs to both instigate economic activity and work toward the government's other goals, including transitioning to greener energy, improving education and increasing vaccine production. Transfer payments to households in need have also increased by over 100 billion CAD$ from 2019 to 2020. Businesses also received over 80 billion CAD$ in wage subsidies in 2020. This spending has put a massive imbalance in Canada's national budget, creating a deficit of over 10% relative to GDP in less than a year. Although the Canadian budget is projected to recover by as soon as 2024-2025, this can only be achieved through spending cuts over the next few years, which would stifle and perhaps impend several of the newly created projects and reduce the government's ability to survive another downturn, should one come.

Figure 2: Canada's national debt (Billion CAD$)

Canada's national debt has been on an upward trend over the previous few years under the Trudeau government, with the smallest increase being between 2014-2015 of just under 3 billion CAD$. The COVID pandemic and resultant government spending caused an increase of just over 35 billion CAD$ in 2020 alone, with surely more to come in 2021 as the minister of finance created large spending programs to "kill the recession". These large spending plans have been predicted to push the government debt to over 1 trillion CAD$ by 2022, representing 51.2% of GDP. It remains to be seen how the Canadian government will deal with these mounting debts: attempting to pay them off too soon would cut necessary funding sustaining other government ventures generating much needed economic activity, but clearly these increases are not sustainable in the long run either.

United States debt level

What is a Government budget/debt?

The government budget is a financial statement that demonstrates the government’s suggested revenues and spending for the financial year. Budget surpluses occur when income exceeds expenditures. Budget deficits occur when spending exceeds income. The national debt excludes the current account.

The government budget includes money spent on military services. Military spending in the US amounted to 714 billion U.S. dollars in 2020. This is likely due to having one of the largest armies in the world (airforces, navy and Marine Corps). Especially since the US had affairs within Syria, Iraq and Afghanistan (up until recent 2020 and 2021 changes) it was a heavy burden having to constantly supply the army with whatever resources needed.

"The amount of funding that goes towards the Department of Defense is heavily criticized by Democrats in the United States, because they believe that the funding should be more evenly distributed towards other social welfare programs such as public health insurance and education." - Erin Duffin, Statista

United States debt for last 5 years (2015-2020):

Year	2016	2017	2018	2019	2020
National Debt	19 573.45 Billion	20 244.9 Billion	21 516.06 Billion	22 719.4 Billion	26 945.39 Billion
Budget Balance	-811.35 Billion	-902.23 Billion	-1 115.2 Billion	-1 218.58 Billion	-3 316.07 Billion

https://www.statista.com/statistics/269963/budget-balance-of-the-united-states/

https://www.statista.com/statistics/187867/public-debt-of-the-united-states-since-1990/

Recently in 2020 and 2021, the national debt of the US has risen drastically, from around 22 000 billion to almost 27 billion. This is likely due to the CARES act being implemented as a response to COVID's impact as well as the further anticipated impact it may have on the economy. This fiscal policy helped provide subsidies for healthcare industries to purchase equipment and medicinal supplies. Businesses were able purchase machinery and invest. Individuals recevied varying subsidies based on their situation such as unemployment benefits, subsidies towards married individuals etc. A combination of government spending, investment and consumption may help boost aggregate demand (AD) to avoid an extreme recession.

Another reason that debt may be higher is due to tax cuts and subsidy benefits. This fiscal policy helps incentivize firms and individuals to spend or invest due to having a higher disposable income. These include deductions income tax and corporation tax among others such as social security tax. More spending in theory should also lead to a higher AD as well.

Having a high debt is not necessarily bad. While it may force governments to have to borrow more often, the money is likely being used to help fuel AD through government spending in order to reduce unemployment and increase economic growth.

New Zealand - Budget and National Debt

New Zealand National Budget 2021 The Minister of Finance, Hon Grant Robertson, delivered the The Wellbeing Budget of 2021 on Thursday, 20 May 2021. According to New Zealand’s The Treasury, “Budget 2021 supports the long-term wellbeing of New Zealanders by making significant progress towards our Government priorities this term to: • continue to keep Aotearoa New Zealand safe from COVID-19 • accelerate the recovery and rebuild from the impacts of COVID-19, and • lay the foundations for the future, including addressing key issues, such as our climate change response, housing affordability and child poverty In addition to a core $3.8 billion operating per year Budget 2021 package, we are funding a number of initiatives from the COVID-19 Response and Recovery Fund (CRRF) to support our recovery and rebuild from COVID-19. The CRRF retains a $5.1 billion buffer for us to respond to future resurgences of COVID-19.” Figure 1. New Zealand: Budget balance between 2016 to 2026 in relation to GDP New Zealand’s budget balance in relation to its GDP has consistently been above 1% prior to 2019; however, it has experienced another significant disruption in 2019 causing a large change in it’s figures. The budget has decreased by -3.41% from 2018 to 2019 and experienced an even drastic drop from 2019 to 2020 of -3.43%. This is likely due to the government shifting to a more wellbeing-based in terms of their overall priority and objective and, als, may have been affected by the COVID-19 situation. Likely caused by large decreases in economic activity due to tourist bans and other factors. National Debt Figure 2. New Zealand: National debt from 2016 to 2026 in billion U.S. dollars Prior to 2019, the trend for New Zealand’s national debt has been projecting downwards; however, it experienced a significant disruption in 2019 and has an upward projection from 2019 onwards. This is likely due to the COVID-19 pandemic situation which brought New Zealand into minimal lockdowns and tourist bans. New Zealand, debt, budget, fiscal policy, aggregate demand Links: https://www.treasury.govt.nz/publications/budgets/budget-2021 https://www.treasury.govt.nz/sites/default/files/2021-05/b21-at-a-glance.pdf https://www.statista.com/statistics/531824/national-debt-of-new-zealand/ https://www.statista.com/statistics/436525/new-zealand-budget-balance-in-relation-to-gdp/

Poland - Government Debt in relation to % of GDP
Figure 1: Government Debt to GDP from 2016 to 2020

As we can see from the Figure 1 the government dept level followed a negative trend for the first four years, from 2016 to 2019, then It suddenly skyrocketed in the year 2020. The government dept in 2016 amounted to 54.2% of GDP, thereafter it gradually decreased to 45.6% in 2019. In 2020 the recorded dept was at a peak 57.5% of the GDP. This was caused by the extensive government borrowing to fund the Covid packages aimed mostly to support Businesses and self-employed, which couldn't sell their goods and services, due to restrictions. The graph follows a cycle during which the government reduces debt with the the economic growth and increases dept during recession.

United States

Context:

United states is a country located in North America with a current population of around 331 million people

as of the start of 2020, making it the 3rd most populated country in the world. The US has well-developed

infrastructure as well as high productivity allowing it to be the world’s second largest manufacturer of

goods just behind China.

GDP Analysis:

Both nominal and real GDP increased every year from 2011 to 2020. However in 2020 we saw both real

and nominal GDP decrease most likely due to the economic damage the COVID pandemic caused. It was

a moderate decrease of -3.5%. 

The real GDP has had a consistent rise over the past 10 years which does not support the business cycle

that well. Interestingly, the GDP growth constantly shifts from decreasing to increasing showing how

GDP increases at different rates. 

United States for last 10 years (2011-2020):

Year	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020
Nominal GDP	15.543 Trillion	16.197 Trillion	16.785 Trillion	17.527 Trillion	18.238 Trillion	18.745 Trillion	19.543 Trillion	20.612 Trillion	21.433 Trillion	20.937 Trillion
REAL GDP ($)	15.841 Trillion	16.197 Trillion	16.495 Trillion	16.912 Trillion	17.432 Trillion	17.731 Trillion	18.144 Trillion	18.688 Trillion	19.092 Trillion	18.426 Trillion
GDP per capita($)	49,887	51,611	53,118	55,065	56,839	57,952	60,062	62,996	65,298	63,051
GDP Growth,	1.6%	2.2%	1.8%	2.5%	3.1%	1.7%	2.3%	3%	2.2%	-3.5%

https://www.statista.com/statistics/1031678/gdp-and-real-gdp-united-states-1930-2019/

Spain - Wellbeing

 OECD Better Life Index

Spain ranking - 19th out of 38 countries

What they scored highest in - safety (9.2 / 10)

What they scored lowest in - Income (4.0 / 10)

Spain has a low income with a considerable gap between the richest and poorest and people have a sense of safety and security as Spain's homicide rate is 0.6, lower than the OECD average of 3.7

Something that was expected was the relatively low score for jobs at 4.7 of 10 due to the economic crisis back in 2012 and Spain's difficulty to recover. The percentage of the labour force that has been unemployed for a year or longer is currently at 7.7%, much higher than the OECD average of 1.8%. Spain suffers a high level of structural unemployment. Since the economic and financial crisis. One leading cause is an economy based mostly on tourism and building sectors, as well as lack of industry.

http://www.oecdbetterlifeindex.org/countries/spain/

World Happiness Index

Spain
Overall Rank	Score	GDP per capita	Social support	Healthy life expectancy	Freedom to make choices	Generosity	Perception of corruption
28	6.401	1.231	1.421	1.051	0.426	0.165	0.110

https://en.wikipedia.org/wiki/World_Happiness_Report#cite_note-47 

 

There is a high social support in Spain, people believe that they know someone they could rely on in time of need or in crisis

Happy Planet Index Ranking

15th out of 140 countries

HPI score 36.0

What they scored highest in - Life expectancy (6th of 140 countries)

What they scored lowest in - inequality (22nd of 140 countries)

http://happyplanetindex.org/countries/spain

Spain is ranked fairly high on the Happy Planet Index. This could be due to the fact that this index does not take into account the economic wellbeing of its citizens but their happiness or due to the fact of a false consciousness.

Response to hamzah's question:

Spain’s economy has been recognized as one of the most paramount in the world due to its high exports of goods, however it has been bogged down by multiple crises over the past several years. Economical disasters left the Spanish economy with long-term obstacles that the Spanish government has struggled to overcome. The Spanish economy prospers from a low import and high export method which was initially implemented after the global financial crisis in order to help the country become more profitable. In the first quarter of 2020 Spain's GDP decreased by -0.5% but jumped to 5.9% in the next quarter as the country ramped up its exports further to the point that of Spain becoming one of the world’s top exporters. The exported goods bring in money, increasing its GDP and despite the economic slump due to the pandemic, Spain now seems to be recovering and forecasts are rather optimistic.