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The global economic outlook is looking a shade brighter to the crystal-ball gazers at the World Bank and the International Monetary Fund, now that the U.S. recovery seems intact and the ailing euro zone is finally out of intensive care. But there are plenty of "ifs" attached to this optimism, starting with the possible actions of major central banks, the spectre of deflation in the developed economies, reduced capital flows to emerging markets and the risks these could pose to a world economy that remains extraordinarily vulnerable to a relapse.

In its latest update, the World Bank forecasts global growth of 3.2 per cent this year, 0.2 percentage points better than in its previous outlook last June. That would mark the fastest expansion since a 4.3 per cent gain in 2010. Back then China and other emerging powers led the charge. Now, it's the major developed economies supposedly driving the train.

The IMF, which will issue its own revised guesstimate in a few days, is expressing similar qualified optimism. "Momentum strengthened in the latter half of 2013, and should strengthen further in 2014 – largely due to improvements in the advanced economies," IMF managing director Christine Lagarde said in a speech for delivery in Washington Wednesday. "The deep freeze is behind, and the horizon is brighter."

The latest tea-leaf readings helped drive U.S. equities to another record high. Still, growth will remain well below the 4 per cent considered optimal, and the projections depend heavily on what happens as the U.S. Federal Reserve and other central banks rein in monetary stimulus in coming months.

Emerging countries faced with large current account imbalances are particularly vulnerable to reductions or reversals in global capital flows that could stem from higher interest rates in the U.S. and Europe and a drastic reduction in other extraordinary monetary measures that have largely been in place since the global meltdown in 2008-09. The worst of the fallout – a sudden loss of access to capital leading to damaging financial crises – is "likely to be concentrated among middle-income countries with deeper financial markets and domestic imbalances," the World Bank warns.

Analysts cite Brazil, India, Indonesia, Turkey and South Africa as the most at risk. Eastern Europe is another source of concern, and the rebound in the advanced economies is not all that certain either, as Ms. Lagarde cautions. "With inflation running below many central banks' targets, we see rising risks of deflation, which could prove disastrous for the recovery. If inflation is the genie, then deflation is the ogre that must be fought decisively."

The World Bank suggests the advanced economies may be "finally turning a corner" half a dozen years after the worst financial crisis since the 1930s. For my money, there are still too many red flags, sharp curves and rock falls to be confident of smooth driving along the road to a sustained global recovery.

Leaving aside the deflation threat, the Chinese credit bubble, euro zone unemployment and the risks posed by tighter monetary policy, another reason for caution is that Main Street doesn't appear to have absorbed the message about things looking up. Just look at the latest news from the retail front, where heavy losses and deep layoffs at Sears (more than 1,600 jobs in Canada) and J.C. Penney (2,000 U.S. jobs and 33 store closings) overshadowed higher consumer spending in the fourth quarter.