Question

3) Greece, Ireland, Portugal, and Spain all went through national budget difficulties in recent years, use the data below to answer questions regarding the sovereign debts of these nations (All data is in billions of current US dollars)

	2008			2018
	Debt	GDP		Debt	GDP
Greece	$           138	$            127		$          502	$                 304
Ireland	$             34	$               98		$          109	$                 200
Portugal	$             62	$             118		$          200	$                 231
Spain	$           292	$             586		$          700	$              1,620

a. compute the debt-to-GDP ratio for all four nations for 2018

b. Compute the average yearly budget deficit for each of the nations over this period.

c. In your judgment, which of the four nations was in the worse fiscal shape in 2018? Use your computations from above to justify your answer.

Answer 1

1. Debt to GDP Ratio of nations in year 2018 are mentioned below -

Greece - Debt to GDP ratio = 502/304 = 1.65

Ireland - Debt to GDP ratio = 109/200 = 0.545

Portugal - Debt to GDP ratio = 200/231 = 0.866

Spain - Debt to GDP ratio = 700/1620 = 0.432

2. For 2008 For 2018

Budget deficit for Greece = 127 - 138 = -11 Budget deficit for Greece = 304 - 502 = - 198

Budget deficit for Ireland = 98 - 34 = 64 Budget deficit for Ireland = 200 - 109 = 91

Budget deficit for Portugal = 118 - 62 = 56 Budget deficit for Portugal = 231 - 200 = 31

Budget deficit for Spain = 586 - 292 = 294 Budget deficit for Spain = 1620 - 700 = 920

Average deficit for Greece = [(-11) + (-198)] / 2 = -104.5

Average deficit for Ireland = [64 + 91] / 2 = 77.5

Average deficit for Portugal = [56 + 31] / 2 = 43.5

Average deficit for Spain = [294 + 920] / 2 = 607

c. Due to highest budget deficit of - 198 USD, Greece is in worse fiscal shape in 2018.