Drawing from their 2025 analyses, both institutions highlight significant risks that could trigger a financial crisis in the next 1–3 years. While neither is predicting a definitive event, they're not shying away from the major red flags.

The Big Concerns

* Trade Wars: The IMF points to unprecedented U.S. tariffs on Chinese goods, leading to a world trade uncertainty index seven times higher than during the COVID-19 crisis. This policy-driven chaos disrupts supply chains and investment, stalling global growth. The World Bank echoes this, noting that trade barriers are slowing growth to its weakest level in 17 years outside of a recession.

* Growing Debt: Public debt is on the rise globally, with the IMF projecting it will near 100% of GDP by the end of the decade. The World Bank notes that half of low-income countries are already in debt distress. High debt, combined with rising interest rates, could lead to a wave of defaults or banking crises.

* External Shocks: Geopolitical tensions and climate change are also significant threats. Disruptions to oil and food supplies could cause inflation to skyrocket, while extreme weather events and conflicts disproportionately affect vulnerable economies.

* Structural Weaknesses: Aging populations and declining labor forces in some countries, along with weak institutions and high trade barriers in others, create a less resilient global economy that's ill-equipped to handle a major shock.

Potential Crisis Scenarios

The IMF and World Bank's insights point to several ways a crisis could unfold:

* Trade War Escalation: A full-blown U.S.-China trade war could collapse global trade and cause markets to crash.

* Emerging Market Debt Crisis: Rising borrowing costs could trigger a domino effect of defaults in countries with high debt.

* Commodity Shock: A sudden disruption to oil or food supplies could lead to global stagflation.

What to Watch

While the future isn't set in stone, the warnings from the IMF and World Bank suggest a fragile global economy. Keep an eye on trade policy shifts, debt indicators, and geopolitical developments for signs of trouble. It's a complicated picture, but understanding these key risks is the first step toward navigating the uncertain road ahead.