Excessive risk taking poses threat to global economy: IMF

The global economy, in a weak and uneven pick up mode, is under threat from excessive risk taking and geopolitical hazards, the International Monetary Fund has warned.

According to its assessment prepared for finance ministers and central bank governors of the G20 countries, the problems in the US, the eurozone, China, Japan, Russia and Latin America meant growth would not meet the 3.6 per cent projected for 2014 in April.

The IMF added it expected the world economy to pick up speed during 2015 as long-term interest rates remained low, central banks were supporting activity and as share prices increased.

However, in a warning, it said new threats could be building even before the global economy had recovered fully from its biggest downturn since the Great Depression of the 1930s.

"New downside risks associated with geopolitical tensions and increasing risk taking are arising," the IMF said.

It added other risks originated from low inflation, a permanent slowdown in growth rates in the west, lower growth in emerging economies and the possible disruption to financial markets that might be caused when the US Federal Reserve started to up interest rates.

"Despite setbacks this year, global recovery is proceeding but remains unbalanced," the paper on global prospects and challenges said. "In many advanced economies legacies of the boom and subsequent crisis – including high private and public debt – still weigh on the recovery despite relaxed financial conditions."

Meanwhile, G20 host Australia is urging the group of top economies to swiftly finalise regulations aimed at preventing a repeat of the crash and focus on measures to revive sputtering global growth, Reuters reported.

However, the efforts of the Group of 20 finance ministers and central bankers, set to meet this weekend in Cairns, Autralia, could end up being drowned out by growing alarm over geopolitical tensions and increased market volatility.

Reuters quoted London-based Lena Komileva, chief economist at G+ Economics as saying they would do so against a backdrop of downgraded OECD growth forecasts and a deteriorating global political climate.

According to commentators, headlines from the G20 would need to vie with any fallout from  Scotland's independence vote on today and ongoing US interest rate speculation that had pushed the dollar to six-year highs against the yen.

However, treasurer Joe Hockey said this week he and his G20 colleagues were focused on delivering jobs and growth more than ever before.