Global risks, threats to a sustainable world economy — Ahmad Ibrahim

Malay Mail

30-05-2025

MAY 30 — Climate change and resource depletion are two of the defining risks to the global economy. This explains the growing worldwide efforts to reduce carbon emission and practise the efficient use of resources. But the climate and resource risks, though major, are not the only threats. The world economy today faces a complex, interlinked set of risks.
As a country, Malaysia also has to deal with similar risks. Effectively managing them is key to our sustained economic performance. The other major risks include geopolitical tensions and conflicts, global health crises, financial system instability, technological disruptions, cybersecurity risks, inequality and social unrest, and demographic shifts. We also know for a fact that where there are risks, there are also opportunities.
There is no doubt that political instability and trade disputes can disrupt supply chains, energy markets, and global investment flows. The Ukraine-Russia war and US-China trade tensions are recent examples. Though many know that diplomacy and multilateralism through forums like the UN, Asean, G20, and WTO are the ways to manage them, executing is never easy. Aside from diplomacy, diversifying trade and energy routes, as well as building regional trade agreements to minimise overdependence on specific countries can be possible solutions.
The Covid-19 pandemic showed how a health emergency can cripple economies, disrupt labour markets, and affect global travel and trade. — Unsplash pic
The Covid-19 pandemic showed how a health emergency can cripple economies, disrupt labour markets, and affect global travel and trade. Dealing with such health crisis includes investing in global health infrastructure, early warning systems, and pandemic preparedness. They also include building resilient, flexible supply chains for essential goods like medicines and food and of course international cooperation for the rapid deployment of vaccine and treatment.
It is no secret that financial crises, market volatility, and debt defaults can destabilise economies. Possible solutions include strengthening global financial regulations and oversight, maintaining sound fiscal and monetary policies. Rapid technological change is also a risk. It can displace jobs, widen inequality, and increase vulnerability to cyberattacks on financial systems, infrastructure, and data. We need to invest in digital infrastructure and cybersecurity, updating regulations to keep pace with technology (AI ethics, data privacy), and reskilling and upskilling the workforce for the digital economy.
Rising wealth and income inequality form another risk. They can trigger social unrest, political instability, and economic stagnation. This is where implementing inclusive economic policies and access to education matter. Small businesses need support and strengthening the social protection systems can make a difference. Furthermore, the ageing populations in developed countries create mismatches in the labour markets, pensions, and healthcare. Reforming pension and healthcare systems for ageing societies, investing in education and job creation for young populations, and managing migration policies effectively can be the tonic to neutralise such risks.
How then can the world sustain the global economy amid these risks? A popular suggestion is to adopt a circular economy model. And decouple economic growth from resource use and emissions through renewable energy, sustainable agriculture, and waste management. Also need to build resilient supply chains by diversifying suppliers, investing in local production capacity, and use digital tools for real-time risk management. No country can tackle these risks alone. Strengthening global governance and partnerships is crucial. Not to mention promote responsible technological innovation. This is where we ensure that emerging technologies are developed with ethics, inclusivity, and sustainability in mind.
The risks to the global economy are increasingly interconnected. A financial crisis can amplify social unrest. A pandemic can trigger supply chain and geopolitical tensions. A systems-thinking approach to risk management, grounded in sustainability, resilience, and global cooperation, is the most effective path forward. Systems thinking is increasingly recognised as a powerful approach for managing complex, interconnected risks in today's global economy. Systems thinking is an approach to problem-solving that views challenges as parts of a broader, interconnected system rather than isolated issues. It focuses on understanding relationships and feedback loops, and identifying leverage points for interventions.
How then to apply systems thinking to risk management and sustainability? First map the system. Use tools like causal loop diagrams, systems maps, or stock-and-flow models to visualise how different risks and factors interact. Identify reinforcing and balancing loops within the system. Economic inequality reinforcing social unrest, which in turn destabilises markets and worsens inequality. Focus on areas where small interventions can produce large system-wide changes.
Education reforms can uplift economies, improve health, reduce crime, and empower communities simultaneously. Move beyond siloed thinking. Address climate, health, financial, and social risks through integrated policies and partnerships. There is no denying that by effectively managing such global risks, the impending threats to the world economy can be neutralised. The systems approach is the right way.
* The author is affiliated with the Tan Sri Omar Centre for STI Policy Studies at UCSI University and is an associate fellow at the Ungku Aziz Centre for Development Studies, Universiti Malaya. He can be reached at [email protected].
** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.