The International Monetary Fund has said that it sees the dynamics of global growth shifting, with the major economies strengthening while developing countries slow.
The international lending agency released the assessment in advance of the Group of 20 summit of the world’s largest economies, set for later this week in Russia.
The IMF forecast global growth will accelerate in 2014 compared to this year.
It predicted the US will be the main driver of global growth in the near term, as private demand, housing and labor markets all strengthen. European and Japanese economies recovering from a slump will also contribute.
Europe has just started to pull out of six quarters of contraction with a small expansion in the second quarter.
However, Japan is expected to slow in 2014.
The forecast is a departure from IMF assessments earlier this year that saw developing economies such as China, India and Brazil as the drivers of the global economy this year.
But the IMF notes those developing countries have been hardest hit in the past few months by the US central bank’s warning that it will soon taper its massive bond—buying program that poured cash into the economy to stimulate it.
That slowdown in emerging markets, particularly Brazil, China and India, could hold back global economic growth, the IMF warned.
“Although policymakers continue to show resolve to keep the global economy away from the precipice, the greatest worry may well be a prolonged period of sluggish global growth,” the assessment said.
It warned that downside risks to developing economies have increased as the US readies to reduce stimulus. While interest rates were low in the US and cash plentiful, capital flowed into emerging markets where rates were higher.
Now some of that money is flowing back into the US as market interest rates rise again, causing turmoil in emerging markets.
The IMF said the Federal Reserve could start to taper the stimulus as early as this month.
The IMF said strengthened global action is needed to better manage risks, including stronger regulatory oversight.
And it cautioned authorities in emerging markets that they may need to intervene in the currency markets to calm excessive volatility.