As the global economy heaves a sigh of relief over the US avoiding a debt default, the world growth prospects remain bleak with advanced economies remaining ill-equipped to  make up for a more sluggish expansion in the developing world.

Recently, the International Monetary Fund (IMF) expressed guarded optimism about the state of the global economy, saying a stronger performance in most advanced economies would fail to make up for structural deficiencies in emerging markets around the world.

Prospects for emerging markets, long the engine of the global recovery, have dimmed somewhat with both structural and cyclical factors at play, the IMF said.

China and India, in particular, are fighting hard to maintain their current growth rates, although these are still much higher than in the developed world.

The IMF now expects global output to expand just 2.9% this year, down from its July estimate of 3.1%, making it the slowest year of growth since 2009. It sees a modest pickup next year to 3.6%.

However, the end of a US government shutdown is good news to global markets as the world’s largest economy drives much of the global recovery.

The standoff had rattled global markets and threatened the image of US Treasury debt as a risk-free place for governments and investors to store trillions of dollars in reserve.

According to the IMF, the US output should pick up further next year - so long as politics does not get in. 

Had the US failed to raise the nation’s $16.7tn debt ceiling, the world’s largest economy would have tipped into a deep downturn, leading to potential turbulence around the global markets.

The state of health of the emerging economies, particularly the Brics grouping of Brazil, Russia, India, China and South Africa, is key to global economic recovery.

The IMF forecasts showed emerging markets still account for much of global growth, with their economies forecast to expand nearly four times as fast this year as that of advanced economies. But the IMF said the heady expansions some have enjoyed may be a thing of the past.

China, in particular, should slow over the medium term as its economy transitions away from investment as a driver to consumption, the IMF said. Lower growth in the world’s second-largest economy could spill over to others, especially commodity exporters dependent on China’s hunger for energy.

Now that the US Federal Reserve is reportedly preparing for an exit from its massive bond-buying programme, risks of tighter financial conditions prevail.

While IMF’s chief economist Olivier Blanchard said it was time for the US central bank to prepare for an exit from its massive bond-buying programme, he warned the transition could be difficult for global financial markets.

“The communication problems facing the Federal Reserve are new and delicate,” he wrote in a foreword to the IMF’s report. “It is reasonable to expect some volatility in long rates as Fed policy shifts.”

In the United States, a tighter fiscal policy should shave 2.5% from output this year, according to the IMF.

In Europe, a better mood more than any change in policy lifted core economies such as Germany and France, and even Italy and Spain should edge into positive growth territory next year, the Fund said.

Failure to address problems in Europe and the possibility of a surprisingly sharp tightening of financial conditions as the Fed withdraws from its massive bond-buying programme may lead to medium-term global growth of only 3%, the IMF said.