World economy: The hidden rocks

Large parts of the world are still struggling with the burden dumped on their shoulders by the financial crisis - even now, eight years after its onset.

And there are dangers not far beneath the surface that could easily cause a new setback.

Even if those risks don't materialise, the outlook for this year, the IMF has said, external, is economic growth that is only "moderate with uneven prospects across the major countries and regions".

The recovery from the financial crisis and the Great Recession of 2008-09 continues and some areas do seem to be gaining some strength. The US is a notable example and there are signs that the eurozone may be putting the worst behind it.

But the global economy is still struggling to regain the momentum it had in the last decade, before the crisis. And then there are the risks.

The most topical case is the eurozone and the never-ending crisis in Greece. The latest developments suggest the eurozone will avoid, at least for now, the turbulence that a Greek abandonment of the currency might cause.

It is, however, a risk that remains lurking in the background. The mainstream view among eurozone governments and investors is that an exit would be very bad for the Greek economy and financial markets. But they think contagion to other parts of the eurozone, never mind beyond, would be containable.

Eurozone financial markets did wobble significantly at the start of the week, but then regained their composure. It's the bond market, where government debt is traded, which is where contagion to other countries' finances could take place.

There were moves in the direction you might expect if contagion were an issue - higher borrowing costs for Spain, Italy and Portugal and lower for Germany - but they were too small to be a problem. So far all countries bar Greece have borrowing costs in the bond market that are affordable.

That's not a universal view, however, and the US administration in particular has been wary about eurozone developments. The Treasury Secretary, Jack Lew, has repeatedly pressed European leaders to reach an agreement to keep Greece inside the eurozone.

Full coverage: Greek debt crisis

A bigger preoccupation for financial markets over the last year has been US interest rates. The Federal Reserve's main rate target is close to zero (actually a range of zero to 0.25%). It has been there since December 2008 in the depth of the recession.

The Fed will raise rates, probably later this year. The economy is recovering and unemployment has fallen far from its peak. Certainly, inflation is very low and the jobs market is not as healthy as the headline unemployment figure suggests. But that just means the Fed will not raise rates very quickly once it has made a start.

The big concern about the rise when it comes is the potential impact on financial markets, especially in emerging economies. Higher interest rates in the US will encourage investors to move money back there, money that went overseas in the first place because rates were so low.

If that does happen it could force down the prices of the assets and the currencies that those investors sell. When they sell bonds - which are a form of tradable debt - a fall in the price is in effect an increase in local financial market interest rates, external.

So the Fed move could lead to higher borrowing costs and a weaker currency, for many emerging economies, which in turn could mean higher inflation - because a declining currency makes imported goods more expensive.

We have already had one episode of this - it was known as the "taper tantrum"- when the then-Fed chairman Ben Bernanke signalled plans to cut back (taper) the quantitative easing programme of buying financial assets. It caused significant turbulence in a number of emerging economies, though they got through the episode without any major upset.

Would they survive unscathed again? Perhaps, but there are risks and some economies are seen as a little vulnerable - South Africa, Turkey and Brazil, for example.

Economic growth in China has slowed, and that's generally reckoned to be a good thing. The 10% annual average over the last 30 years was widely thought to be unsustainable, too dependent on extremely high levels of investment.

The growth figure last year was 7.4% and the IMF forecast is for less than 7% this year.

There is a persistent concern that the slowdown might be bumpy - a hard landing as it's often called.

The property and stock markets are potential trouble spots. The IMF warned, external in April that "property price declines - especially in China - could spill over to emerging markets more broadly".

A more general deterioration in China's economic performance could affect suppliers of commodities - ranging from copper from Chile to iron ore from Australia and many more.

Why China's slowdown matters

Political events have the potential to disturb the global economy. The current possible flashpoints are Ukraine and, as it so often is, the Middle East. So far neither has had a major impact on the global economy.

Indeed, one of the main economic dangers they pose, especially in the case of the Middle East would be a disruption of the crude oil market leading to a sharp rise in prices. But currently oil costs little more than half of what it did a year ago.

Full coverage: Ukraine crisis

Full coverage: Islamic State conflict

For the longer term, there's a question over whether the world will get back to pre-crisis growth rates., external Many rich and emerging countries have ageing populations. The effect may be partly offset by increased retirement ages, but it could still be a restraining factor for economic growth.

For the rich countries there is also a legacy of the financial crisis in the shape of lower levels of investment. Growth in emerging economies may be restrained as they approach what the IMF calls the "technological frontier".

They are getting closer to exhausting the relatively easy improvements in efficiency that can be achieved by adopting technology and business methods that are already established in more advanced economies.

There is a great deal of uncertainty with this longer term outlook, but there are reasons for suspecting that the world economy in the next few years will be a lot less exuberant than the period before the financial crisis.