Jan 22, 2019

No end in sight to world's rising debt

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

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The year of the protest meets the year of the lockdown

Hong Kong demonstrators protest a government ban on face masks in October. Photo by Laurel Chor/Getty Images

The year of the mass uprising has collided with the year of the coronavirus lockdown, leaving protest movements around the world stalled. 

The big picture: The enduring images of 2019 are of protest — from Hong Kong to Khartoum, across the Middle East and through much of Latin America. Seemingly overnight, though, social distancing has made such mass demonstrations almost unthinkable.

Go deeperArrow1 hour ago - World

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 3 a.m. ET: 665,164 — Total deaths: 30,852 — Total recoveries: 140,225.
  2. U.S.: Leads the world in cases. Total confirmed cases as of 3 a.m. ET: 124,665 — Total deaths: 2,191 — Total recoveries: 1,095.
  3. Federal government latest: President Trump announces new travel advisories for New York, New Jersey and Connecticut, but rules out quarantine enforcement. Per the CDC, residents of those states must now "refrain from non-essential domestic travel for 14 days," with the exception of critical infrastructure industry workers.
  4. State updates: Alaska is latest state to issue a stay-at-home order — New York is trying to nearly triple its hospital capacity in less than a month and has moved its presidential primary to June 23. Some Midwestern swing voters who backed Trump's handling of the virus less than two weeks ago are balking at his call for the U.S. to be "opened up" by Easter.
  5. World updates: In Spain, over 1,400 people were confirmed dead between Thursday to Saturday.
  6. 🚀 Space updates: OneWeb filed for bankruptcy amid the novel coronavirus pandemic.
  7. Hollywood: Tom Hanks and Rita Wilson have returned to U.S. after being treated for coronavirus.
  8. What should I do? Answers about the virus from Axios expertsWhat to know about social distancingQ&A: Minimizing your coronavirus risk
  9. Other resources: CDC on how to avoid the virus, what to do if you get it.

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Coronavirus updates: Global death toll tops 30,000

Data: The Center for Systems Science and Engineering at Johns Hopkins, the CDC, and China's Health Ministry. Note: China numbers are for the mainland only and U.S. numbers include repatriated citizens and confirmed plus presumptive cases from the CDC

The novel coronavirus has now killed more than 30,000 people around the world — with Italy reporting over 10,000 deaths, per Johns Hopkins data.

The big picture: The number of deaths from COVID-19 in the U.S. surpassed 2,000 on Saturday. The United States leads the world in confirmed coronavirus infections — more than 124,000 by early Sunday. The number of those recovered from the virus in the U.S. passed the 1,000-mark on Saturday evening.

Go deeperArrowUpdated 5 hours ago - Health