The global economic recovery is set to gather momentum in 2014 says the International Monetary Fund (IMF), but it warns about undue optimism with the rebound “weak and uneven”.

IMF economist Olivier Blanchard has indicated that global growth would pick up to 3.7 per cent in 2014 from 3 per cent in 2013.

The expansion will be fuelled by US, euro zone and Japanese growth, though deflation and financial-sector risks threaten a full recovery.

In particular, growth in advanced economies such as the US and UK is set to accelerate at a faster pace in 2014 than their emerging market counterparts.

Blanchard said the financial system is slowly healing, uncertainty among investors is abating and the drag from budget belt-tightening around the globe is decreasing.

The recovery is, however, faced with headwinds in the form of deflation in the euro zone and the gradual winding down of years of ultra-loose monetary policy.

In a summary of conditions around the world, the IMF economist highlighted rebalancing challenges for Japan, big concerns about southern Europe and threats to emerging markets from changing monetary policy. For emerging markets, the IMF forecasts that growth will remain high, but this remains subject to the risk of change in US monetary policy.

“We can expect complex capital movements across countries for some time to come. In that environment, the evidence from last year is that emerging market economies with weak macro frameworks may be most affected,” he said.

The prospects for the world’s largest economy, though, are improving.

On China, Blanchard said “a delicate balancing act” lies ahead of containing the build up of risks in the financial sector without excessively impacting growth.

He also highlighted the risks that could be triggered by a return to a more normal monetary policy after years of quantitative easing and ultra-low borrowing costs in many countries.

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