MULTIPLE CHALLENGES WEIGH ON GROWTH

According to the latest reports from the IMF and the World Bank, global economic growth is projected to inch forward to 3.2 percent and 2.6 percent respectively this year, with both forecasts suggesting a marginal 0.1 percentage point uptick for 2025.

Economists anticipate this year could mark the first stable expansion in three years. But by historical standards, the pace remains sluggish, with numerous headwinds threatening to derail the current trajectory in the latter half of this year.

One looming threat is the mounting global debt. The Institute of International Finance reported a staggering 1.3 trillion U.S.-dollar surge in global debt in the first quarter of 2024, pushing the total to a record 315 trillion dollars. The global debt-to-GDP ratio now hovers at 333 percent, with advanced markets like the United States and Japan responsible for the bulk of the increase.

In the United States, federal debt surpassed 35 trillion dollars for the first time, and interest payments are projected to outstrip defense spending this year. Such ballooning debt poses significant risks to global economic and financial stability, said Sant Manukyan, an analyst at Is Yatirim, the investment banking division of Isbank Group in Istanbul.

Another destabilizing factor is that 2024 is the biggest election year in human history. Half of the world's population will go to the polls in over 70 countries.

In the United States, the economic and industrial policy divides between Democratic and Republican presidential candidates could have far-reaching effects.

For instance, Goldman Sachs economists predict that a re-election of Donald Trump, with his proposed tariff hikes, could shave 1 percent off the eurozone's GDP.

In addition, Guy Platten, secretary-general of the International Chamber of Shipping, warned of dangers posed by a potential Trump presidency to trade, saying the threat is now at its highest level since World War II.

Prolonged geopolitical tensions are another drag on global prospects. The Russia-Ukraine conflict has entered its third year, while the Israel-Palestine conflict is spreading over the region.

The Economist Intelligence Unit's June report highlights an increasingly fraught geopolitical landscape, where competition and conflict risk upending the established international economic order.

Market volatility driven by monetary policy adds another layer of complexity. The Nikkei's slump in early August, fueled by the "Japanese Yen Carry Trade," serves as a reminder of how quickly markets can spiral. This trading phenomenon has peaked twice before, in 1998 and 2007, both preceding major financial crises.

Josh Lipsky, senior director of the Atlantic Council's GeoEconomics Center, cautioned that while a recession in the United States or globally is not a foregone conclusion, the world should prepare for significant turbulence in the financial markets in the months ahead.