Navigating apparent risks in 2025

While signs of gradual recovery appear in certain regions, both developed and emerging economies face challenges that could hinder gross domestic product (GDP) growth, innovation, and investments.

According to the International Monetary Fund, economies such as the United States, the European Union, and Japan are projected to grow at less than 3% annually. This rate, below the threshold required to double per capita income within a generation, signals long-term economic stagnation that could harm living standards.

Large emerging economies, including Brazil, Argentina, and South Africa, face similar issues due to structural inefficiencies, policy inconsistencies, and external pressures.

As global GDP reaches $110 trillion, its uneven distribution highlights disparities that could deepen economic and social divides.

Challenges at a global scale

The latest Chief Economists Outlook from the World Economic Forum stated that countries face heightened uncertainty, uneven growth prospects, and increasing fragmentation of trade and labor markets.

The report revealed that more than half (56%) of chief economists surveyed expect global economic conditions to weaken in 2025, with only 17% predicting improvement.

Aengus Collins, the Forum’s head of economic growth and transformation, described the growth outlook as the weakest in decades, emphasizing the contested nature of economic policy both domestically and internationally.

International nonprofit media organization Project Syndicate also noted that escalating geopolitical conflicts remain a significant threat. For instance, relations among the U.S., China, and Russia are increasingly strained, compounded by risks from nations like Iran and North Korea.

Economic fragmentation is reflected in the rise of economic alliances and the “splinternet,” where digital economies divide along geopolitical lines. This fragmentation limits collective efforts to address global issues like climate change and energy transitions, further intensifying divides.

Similarly, the World Economic Forum reported that 94% of surveyed chief economists expect further fragmentation of goods trade over the next three years, with 59% anticipating similar trends in services trade. This shift is likely to increase costs for businesses and consumers.

The financial sector stands out as a partial exception, with less than half (48%) of participants anticipating increased fragmentation. This trend highlights the role of cross-border financial flows in modern economies, even as supply chain realignments and security concerns continue to reshape the global landscape.

Meanwhile, demographic shifts are reshaping the global workforce and consumer markets. Populations in high-performing economies are aging, while rapidly growing populations in poorer regions face slower economic growth. For instance, China’s population is projected to decline sharply by 2,100, even as its economic growth stagnates.

The dependency ratio, or the dependents relative to the working-age population, is rising globally, placing additional stress on social security and pension systems. Without significant policy reforms or demographic changes, global per capita income growth could decline further.

In addition, the scarcity of critical resources such as arable land, water, energy, and rare-earth elements is another looming challenge, compounded by rapid urbanization and artificial intelligence (AI)-driven energy consumption. Fossil fuels, despite global climate commitments, remain in high demand, with oil consumption exceeding 100 million barrels per day.

Resource scarcity and rising costs are likely to fuel inflation and disrupt supply chains. Geopolitical vulnerabilities, such as China’s dominance in rare-earth production, further complicate resource security.

Furthermore, loose fiscal policies and mounting government debt are creating unsustainable economic conditions. Both advanced and emerging economies struggle with budgetary constraints, limiting their ability to invest in infrastructure, healthcare, and education.

Economic uncertainty in Asia

Although Asian economies show resilience, several external factors will shape the region’s landscape in 2025, according to Oxford Economics.

One of the biggest uncertainties facing Asia is the unpredictable trade policies of the United States (US). With expectations of higher tariffs on goods, particularly targeting China, the effects could ripple across the entire region.

Countries like Vietnam and India, often seen as alternatives to China in global supply chains, may gain limited benefits as the global economic outlook softens. Tariffs on Chinese goods could rise to 30%, while tariffs on other Asian countries might target specific products, reaching up to 10%.

The yield on the US 10-year bond rose before the end of 2024, leading to a stronger US dollar and a decline in Asian currencies. This situation is likely to limit monetary policy flexibility, meaning expected interest rate cuts across Asia may be slower and less effective than initially projected.

China’s ongoing economic struggles present another significant challenge in Asia. The country is experiencing a “balance sheet downturn,” where its economy is burdened by structural and cyclical issues.

Although there are some signs of recovery, fiscal policies have yet to yield results. A slowdown in foreign investments and a shrinking manufacturing sector could exacerbate the economic strain.

Meanwhile, AI remains a significant focus of innovation. Many believe that the AI revolution could be even more transformative than the advent of mobile phones or the internet itself. The production of AI chips in Taiwan, South Korea, and Malaysia places Asia at the forefront of this technology.

The excitement surrounding the potential of AI comes with a word of caution. History shows that technological bubbles can burst. Asia has experienced significant economic crises, including the Asian Financial Crisis, the dotcom bubble burst, and the Global Financial Crisis, all of which have left lasting impacts on its economies.

While AI-related industries are expected to create significant economic opportunities in Asia, particularly in chip manufacturing, there are risks if growth slows. Today, the region’s economies are more resilient than during past crises, but the balance between opportunity and risk remains fragile.

Risks for Philippine businesses

Cyber incidents remain a dominant threat in businesses, tied with business interruption as the top risk in the Philippines with 44%, according to the Allianz Risk Barometer for 2025. This category encompasses cybercrime, information technology (IT) network disruptions, malware, ransomware, and data breaches. The surge in digital transformation and reliance on technology exposes companies to vulnerabilities, with data breaches being the most feared exposure.

To mitigate these risks, businesses are advised to invest in robust cybersecurity frameworks, enhance IT resilience, and comply with stricter data protection regulations.

Cyber incidents also rank as the number one risk globally, reflecting their widespread impact across industries, particularly in financial services, technology, and telecommunications.

On the other hand, business interruption, like supply chain disruptions and operational halts, pose a significant challenge with the country’s susceptibility to natural catastrophes and growing dependence on global trade.

Key strategies to address this risk include diversifying supplier networks, enhancing business continuity plans, and adopting digital supply chain management tools. Industries like manufacturing, transportation, and logistics are prioritizing these measures to ensure resilience.

Meanwhile, the evolving regulatory landscape; encompassing environmental, social, and governance (ESG) requirements; and sustainability mandates present complex challenges, according to 38% of respondents.

Ranked fourth globally but climbing steadily in priority, climate change poses both immediate and long-term risks, especially in the Philippines. The increasing frequency of extreme weather events amplifies threats to infrastructure, supply chains, and ecosystems.

The Philippines’ geographic location also makes it highly susceptible to typhoons, earthquakes, and floods. The rising costs of insured losses, which have surpassed $100 billion globally for five consecutive years, emphasize the importance of preparedness.

Such challenges are expected to shape the global economy; so governments, businesses, and investors alike are suggested to stay agile to ensure resilience and sustainability in the years ahead. — Mhicole A. Moral