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Illustration: Lazaro Gamio/Axios

Last year, the world's debt rose to $244 trillion, or 318% of global GDP, the Institute of International Finance (IIF) found.

Backdrop: The two largest contributors to the rise in debt have been emerging market corporate entities and developed market governments.

  • Governments in developed countries like the U.S., Japan and Europe, "have done very little to bring down debt in recent years despite low borrowing costs and the recent pickup in growth, which should have encouraged them to reign in budget deficits," IIF's Managing Director of Policy Initiatives Sonja Gibbs said. "A good example is the U.S., which has not run an annual budget surplus since 2001."
  • The world is now "pushing at the boundaries of comfortably sustainable debt," she says.

Why it matters: In times of economic strength countries have traditionally reduced their debt, seeking balanced budgets and a safety net for the future. But over the past few years the world's largest economies have done just the opposite.

  • The U.S. added close to $2 trillion in fiscal stimulus to its debt, with increased spending and a massive tax cut, in 2017.
  • The euro zone recently ended $2.5 trillion in monetary stimulus, though European Central Bank head Mario Draghi suggested that end may be temporary.
  • Japan just approved an all-time-high $860 billion budget in addition to $3.5 trillion in monetary stimulus from the Bank of Japan.

However, "after two years of solid expansion the world is growing more slowly than expected and risks are rising," IMF Managing Director Christine Lagarde said at the World Economic Forum's opening this week.

Making matters worse: Emerging economies also have borrowed at an unprecedented rate and at a time when global interest rates are rising and the dollar has strengthened, meaning the loans will cost more to pay back.

  • Gibbs and IIF's Emre Tiftik tell Axios that poorer countries in Africa and the Middle East that have borrowed heavily — more than 25% of guaranteed bilateral credit now comes from China, up from less than 1% in 2007 — are some of the institute's biggest worries.

The bottom line: In 2019 the global economy will face stresses it hasn't seen in at least a decade and central bankers and governments globally will be armed with fewer tools to fight them.

Go deeper: The state of debt in 2018

Go deeper

13 hours ago - World

Maximum pressure campaign escalates with Fakhrizadeh killing

Photo: Fars News Agency via AP

The assassination of Mohsen Fakhrizadeh, the architect of Iran’s military nuclear program, is a new height in the maximum pressure campaign led by the Trump administration and the Netanyahu government against Iran.

Why it matters: It exceeds the capture of the Iranian nuclear archives by the Mossad, and the sabotage in the advanced centrifuge facility in Natanz.

Scoop: Biden weighs retired General Lloyd Austin for Pentagon chief

Lloyd Austin testifying before Congress in 2015. Photo: Chip Somodevilla/Getty Images

Joe Biden is considering retired four-star General Lloyd Austin as his nominee for defense secretary, adding him to a shortlist that includes Jeh Johnson, Tammy Duckworth and Michele Flournoy, two sources with direct knowledge of the decision-making tell Axios.

Why it matters: A nominee for Pentagon chief was noticeably absent when the president-elect rolled out his national security team Tuesday. Flournoy had been widely seen as the likely pick, but Axios is told other factors — race, experience, Biden's comfort level — have come into play.

Updated 15 hours ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Health: WHO: AstraZeneca vaccine must be evaluated on "more than a press release."
  2. Politics: Supreme Court backs religious groups on New York COVID restrictions.
  3. World: Thailand, Philippines sign deal with AstraZeneca for vaccine.
  4. Economy: Safety nets to disappear in December Black Friday shopping across the U.S., in photosAmazon hires 1,400 workers a day throughout pandemic.
  5. Education: National standardized tests delayed until 2022.