Top Risks on the Horizon for 2025: The World Won’t Implode, But It Could Crumble

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Thomas Young
October 7, 2024

Right around this time of year, state, county and municipal budgeters begin thinking about next year’s budget. The federal government recently ended its fiscal year. Budgets are top of mind.

As the world advances towards 2025, a clear set of challenges is emerging on the global stage. While some of these risks are familiar, others are novel, born out of the rapidly evolving technological and geopolitical landscape. If you are a budgeter, anticipating these risks can make or break a career.

Geopolitical Tensions and Economic Fragmentation

The global political landscape is more volatile now than any time in the past 50 years, with rising tensions between major powers. The United States and China, two of the world’s largest economies, continue to engage in a rivalry that spans trade, technology and military influence. While the threat of armed conflict in 2025 is low, the economic fallout from this rivalry poses significant risks.

The trend towards economic fragmentation—marked by the retreat from globalization, regional trade blocs and the resurgence of protectionism—has the potential to continue to disrupt global supply chains. Countries that once relied on each other for critical goods may find themselves vulnerable to shortages or price hikes from trade restrictions. For businesses, this could mean higher production costs and increased uncertainty in accessing raw materials and markets.

Cybersecurity Threats and Digital Vulnerabilities

As more sectors of the economy digitize, the risk of cyberattacks becomes increasingly severe. In 2025, the cybersecurity landscape could very likely be one of the most critical areas of concern, especially as cybercriminals grow more sophisticated. Ransomware attacks, data breaches and supply chain cyber intrusions have become common, with state-sponsored groups joining the fray alongside traditional cybercriminals.

With the rapid adoption of technologies such as 5G, artificial intelligence (AI), and the Internet of Things (IoT), the attack surface for hackers is expanding. Autonomous vehicles, smart cities and even medical devices are potential targets. Cybersecurity defenses must evolve in response, with a focus on AI-driven security systems, quantum encryption and greater international cooperation to address cross-border cyber threats.

AI and Automation: Disruption in the Labor Market

The advancement of AI and automation technologies holds immense potential, but it also presents significant risks to the labor market. In 2025, these technologies will begin in earnest to replace many routine and manual jobs, particularly in industries such as manufacturing, retail and transportation. While AI has the potential to increase efficiency and productivity, it also raises concerns about job displacement and the widening gap between those with high-tech skills and those without.

Individuals, business, and governments must navigate this transformation carefully with an eye towards social cohesion. A major challenge will be for workers to ensure they are trained and taking advantages of opportunities in sectors where human expertise is still irreplaceable.

Energy Transition and Resource Scarcity

As the world gradually moves towards a greener economy, the energy transition itself brings with it certain risks. The shift from fossil fuels to renewable energy sources such as wind, solar and hydrogen will reshape energy markets. The transition, of course, is fraught with challenges, including the scarcity of critical minerals like lithium, cobalt and rare earth elements, which are essential for renewable energy technologies and electric vehicles.

Countries that control these resources may wield significant geopolitical leverage, while nations that depend on fossil fuel exports could face economic destabilization. For businesses, energy costs and availability will fluctuate as the global energy mix evolves. Furthermore, the need to secure supply chains for critical materials will become an increasingly strategic priority.

Social Unrest and Inequality

Widening economic inequality and social fragmentation could drive further unrest in 2025. The widening difference between the uber-wealthy and the wage earner, even though global economies have continued to grow, continues to be a significant risk to consistent economic performance. Rising costs of living, housing shortages and wage stagnation have contributed to frustration, particularly among younger generations who face uncertain economic prospects.

Individuals must be more vigilant than ever in developing their path to wealth. The coming generation is figuring out that the answer does not lie with governments and businesses.

Conclusion

The year 2025 presents a complex and uncertain risk landscape. Geopolitical tensions, cybersecurity threats, technological disruption and different economic growth trajectories are just some of the issues that will shape the global environment. As these risks converge and interact, they create a world where uncertainty is the new normal. To thrive in this environment, governments, businesses and mostly individuals will need to adopt flexible, forward-thinking strategies to mitigate these risks and capitalize on new opportunities.

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Author: Thomas is an economist who splits his time between economic consulting, investing, and appraising. He is a long-time advisor to elected officials, federal and state agencies,and public/private investors. He did his Ph.D. in business economics from the University of Utah.  

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