According to the International Monetary Fund's latest assessment of the global economy released today, the world economy is expected to grow faster than expected this year, but the growth is likely to be slow and the major risks would continue to overshadow recovery.
IMF chief economist Olivier Blanchard said in a statement released with the organisation's latest report that while it predicted that the recovery would continue, it was clear that the downside risks had increased sharply.
''How Europe deals with fiscal and financial problems, how advanced countries proceed with fiscal consolidation, and how emerging market countries rebalance their economies, will determine the outcome.''
In the backdrop of the stronger than expected growth especially in Asian and other emerging markets, the IMF raised its global growth forecast to 4.6 per cent, up from its 4.2 per cent April projection.
At the same time the IMF has cautioned that concerns over the high debt levels of several of the smaller European economies might escalate into a wider financial crisis.
The ability of Greece and some other European states to service their sovereign debt remains a big worry. This has eroded confidence in the soundness of banks in some countries of the euro zone, which has led to financial strains as banks become less willing to lend to each other the IMF observes.