No economic conversation has captured the public's eye quite like the explosion of national debt. From the U.S. to Europe to Asia, leading economies have staved off the worst of the recession by incurring runaway debts that have blossomed to the size of GDP -- or greater.
But which nation is leading this unfortunate race to the debtor's bottom? Among the largest 50 economies worldwide, here are the five most debt-burdened nations, according to IMF estimates for 2013. Investors beware: These lagging leaders may not be the countries you expected.
No. 5: Ireland, 122% Debt/GDP
Kicking things off in fifth place is Ireland, one of the hardest-hit nations in the recession. The crisis slammed the country's GDP and devastated the country's economy; Irish unemployment still lingers above 14% five years after the depths of the recession. Despite the eurozone's recession, however, hope remains for Ireland: The European Commission expects Ireland's GDP to grow 1.1% this year, the third-fastest rate in the eurozone. By 2015, the IMF expects Ireland's unemployment rate to fall below 13% -- not good, but progress nonetheless.
Despite the bleak reality of the Irish economy, investors have capitalized on at least one of Ireland's top stocks. The Bank of Ireland has dropped nearly 98% over the past five years, but the stock has gained more than 92% over the past year. Should you invest in this beaten-down riser? Probably not. While this stock has done well lately, Ireland's recovery -- as well as Europe's -- is still too fragile to bet on risky financial picks like this. Stick to larger, less exposed, and less risky financial stocks in Europe if you're tempted by the sector's regional offerings.
Ireland's debt could fall out of the top 5 if the country's growth outpaces spending, but for now, the Irish economy's meager growth ranks among the leaders in one of the worst economic regions on Earth. That's not a sign that this debt will fall meaningfully soon, and the IMF expects Irish debt to remain above 105% of GDP by 2018.
No. 4: Portugal, 122% Debt/GDP
Spain's neighbor on the Iberian Peninsula hasn't had it any easier throughout the European debt crisis. The recession has crushed the Portuguese economy despite the country's ongoing bailout program, and debt has been racked up despite the country's harsh austerity program designed to rein in spending. Portugal's government recently proposed a new stimulus program, but while that could help the country's lagging businesses, it won't help bring down its skyrocketing debt. With more public-sector job cuts on the table, unemployment at 18%, and GDP expected to fall 2% this year, this country's far from a turnaround.
Investors, stay away. While Portugal Telecom's hefty 5.4% dividend yield and recent moves into developing nations such as China and Brazil might lure investors looking for a beaten-down stock to buy cheap, this pick's anything but ready to rise. The company's Portuguese-based revenue has fallen substantially recently, along with its return on equity. If you're looking for a turnaround candidate, Portugal's floundering economy is one of the last places you should look.
No 3: Italy, 130% Debt/GDP
Let's have a big hand for Italy, Europe's third-largest economy -- and the third-most-indebted top-50 economy in the world. While nations such as Spain and Cyprus have dominated the debt talk in Europe, Italy has slowly dug itself into a giant hole. By posting a seventh straight quarter of economic contraction to start 2013, Italy now finds itself in its longest recession since the country began keeping quarterly economic records in 1970. Throughout the turmoil, Italy's debt has steadily climbed, rising 10 percentage points in the last two years as the Italian government attempts to keep its economy from sinking even further.
There's little to like here for investors. The iShares MSCI Italy Index ETF dove earlier this year with the nation's tumultuous election. While it has recovered since and has posted 30% gains over the past 52 weeks, the Italy ETF has lost 1.3% this year. Italy's economic woes and this ETF's performance aren't one and the same, however. If the European Central Bank continues to lower interest rates as it has in the past, this ETF could rise even as the nation's recession lingers on. However, Italy's a risky proposition at best, and with other, more stable markets surging, there's no reason to take a flier on this pick.
In short, don't expect Italy's debt to come down much in coming years -- nor should you expect its economy to please any economists. The IMF predicts Italian debt to fall less than 7 percentage points over the next five years.