The International Monetary Fund (IMF) said its outlook on the world economy remains positive but that there are risks to the global economic outlook.
According its semiannual Global Financial Stability Report, the IMF today warned that the risks of a global slowdown have increased due to higher interest rates, surging oil prices and an apparent cooling in the US housing market that could slow the US economy.
"If one - or some combination of these risks materialise - financial markets could experience greater turbulence that places stress on international financial markets, possibly with a wider impact on the global economy," said Jaime Caruana, director of the fund's monetary and capital markets department.
Should global growth falter, international financial markets could undergo a more severe correction than the one they experienced in May and June, when emerging markets in particular were hit hard, said the report,
Mr Caruana said the May-June correction "underscored that some emerging markets remain susceptible to a retrenchment by foreign investors because of greater uncertainty in the external environment."
The IMF also warned that the risk of a disorderly decline in the US dollar could increase unless policies are put in place to address global saving and investment imbalances.
"Country authorities need to work co-operatively so that policies facilitate an orderly adjustment of global imbalances and prevent the emergence of disruptive market conditions," Mr Caruana said.
The IMF said emerging Asian countries should be more ambitious in increasing exchange-rate flexibility, the US should consolidate its fiscal position and Europe and Japan should speed up structural changes.
The report also said that demand for US assets will increasingly depend on Asian central banks, which currently hold more than half the world's foreign currency reserves, and oil-producing nations, which have amassed substantial reserves in the last two years or so.
Despite its warnings, the IMF said it sees "a continuation of favourable developments, in both growth and inflation. Under this scenario, corporate earnings growth would remain healthy and default rates low".
Global markets have performed strongly in recent years, resilient to several market corrections, it said. At the same time, global growth remained strong.