Benjamin Chiang and Setio Prabowo (EY) on key risks facing Asian governments

EY has released the 2025 edition of its annual research on the top risks for governments worldwide, identifying 10 developments that are likely to have a major impact on government policy and trustworthiness – if not managed adequately. Asia-based EY leaders Benjamin Chiang and Setio Prabowo reflect on key risks from a regional perspective.

Risk #1: Inability to achieve sustainable public finances

Around the world, governments have been spending to support their economies through the shocks of recent years. The result is high levels of global public debt, which the International Monetary Fund (IMF) projects could reach 115% of GDP by 2026. To avoid a full-blown fiscal crisis, governments must start making difficult decisions now, warns the EY report.

Benjamin Chiang, Government and Public Sector Leader for ASEAN, says: “Maintaining sustainable public finances is the number one public sector risk globally, a challenge that governments across ASEAN are also grappling with. This signals the need for a more comprehensive approach to evaluate public spending, moving beyond measuring inputs and outputs to focusing on outcomes.”

“Such an approach ensures that public funds are prioritized for programs and initiatives that deliver long-term value for citizens, which, in turn, strengthens public trust and confidence in government actions. This is especially critical in the current climate, where public funds are shrinking due to geopolitical uncertainty, trade wars, tariffs and rising influence of regional power blocs.”

Risk #2: Weak or unsustainable economic growth

With many economies seeing sluggish growth, investments in foundations of growth such as entrepreneurship, education and health are under pressure. Meanwhile, the potential impacts of tariffs, aging populations and upward cost pressures resulting from climate change are putting further pressures on the medium-term trajectory for global growth.

One key driver of economic growth in Asia is infrastructure development. But with mounting public debts and rising global borrowing costs, governments will need to explore alternative financing mechanisms to secure long-term investment while ensuring financial stability.

Setio Prabowo, partner at EY, comments: “Governments should focus on financing strategy that align with global best practices. Strengthening public private partnerships is one way to attract sustained infrastructure investment without increasing fiscal burden. Government infrastructure guarantees also provide the necessary risk mitigation that investors seek in emerging markets.”

Risk #3: Failure to close the gap between climate ambition and action

According to the Emissions Gap Report 2024, from the UN Environment Programme (UNEP), a “quantum leap in ambition” is required to prevent catastrophic global warming.

While many governments have created climate action policies and regulations, more public leadership is clearly needed. In many countries, citizens and businesses believe it is the government’s responsibility to achieve better social and environmental outcomes. Yet a recent EY survey found that only 34% say their government is taking enough action.

Chiang states: “For ASEAN, climate change and the growing gap between climate ambition and actual action is major risk plaguing governments. ASEAN countries are among the most vulnerable to the adverse impacts of climate change, be it rising sea levels, heatwaves, floods or droughts.”

“To address these impacts, ASEAN governments should work together to set more ambitious emissions reduction targets, establish stronger disclosure requirements and harmonize sustainable financing standards. These efforts could close the investment gap needed to fund sustainable infrastructure and achieve net zero by 2050.”

Other risks

EY’s report identified seven other risks that governments will need to consider this year:

• Lack of resilience to climate-related shocks
• Labor shortages and growing work informality
• Deficient digital capacity and cybersecurity
• Failure to adapt to a new geopolitical landscape
• Limited or no supply chain visibility and traceability
• Low employee resilience hampering public sector talent advantage
• Unconnected to constituent experiences and needs

Commenting on the risks landscape, Catherine Friday, Global and Asia-Pacific leader of the Government & Infrastructure practice, says: “In 2025, the landscape of public sector risks is more interconnected than ever. By investing in integrated risk management, governments will be able to anticipate and mitigate potential threats more effectively.”

“In doing so, they will build public trust and demonstrate the value they bring. Ultimately, by leading with courage and innovation, governments can become more resilient and adaptable – positioning themselves to shape the future with confidence in an increasingly uncertain world.”