Global growth is slowly improving as recovery in the U.S. gains traction and dangers from Europe recede.

But risks remain elevated and the gains are very fragile, the International Monetary Fund said yesterday.

Another flare-up of the euro-zone sovereign debt crisis or sharp escalation in oil prices on geopolitical uncertainty could easily undermine confidence and disrupt the improving growth path for world economy, the IMF said.

“With the passing of the crisis and some good news about the U.S. economy, some optimism has returned. It should remain tempered,” said Oliver Blanchard, the IMF’s chief economist, in the latest World Economic Outlook.

“Most advanced economies still face major brakes on growth.

“And the risk of another crisis is still very much present and could well affect both advanced and emerging economies,” he said.

The global economy is on track to expand this year by 3.5 per cent and by 4.1 per cent in 2013, up slightly from 3.3 per cent and 3.9 per cent GDP output respectively that the IMF had forecast in January.

The estimate arose when market concern was rampant that Greece could default and Italy and Spain were facing budget crises.

Since then, Greece has restructured its debt, Italy and Spain are adopting tough fiscal measures and euro-zone leaders have agreed to enlarge their bailout fund, causing financial market tensions to ease.

The U.S., meanwhile, is gradually gaining momentum while China and other emerging economies appear on track for gradual slowdowns without crashing, it said.

But the gains are precarious.

Should the euro zone crisis erupt once more, it could trigger a widespread dumping of risky assets and rob two per cent from global growth over two years and 3.5 per cent from the euro zone, the IMF warned.

Additionally, a 50 per cent increase in the price of oil would lower global output by 1.25 per cent, the IMF said.

To secure the global recovery, the IMF urged central banks in the U.S., euro zone and Japan to stand ready to deliver further monetary easing.

The easing will show in governments exercise of caution over the pace of budget cutbacks wherever feasible; and Europe will consider using public funds to overcapitalise banks.

While European leaders have made “major progress” in building fire walls against financial contagion, the region faces a tricky balance of cutting government debt and restoring competitiveness without excessively stifling growth, it warned.

European banks also are de-leveraging, which will reduce their balance sheets by 2.6 trillion dollars over the next two years and slice about one per cent from growth this year alone.

“Bad news on the macroeconomic or political front still carries the risk of triggering the type of dynamics we saw last fall,” the IMF said.

The euro zone is likely to endure a mild recession this year, shrinking by 0.3 per cent and then posting 0.9 per cent growth in 2013, the IMF said.

That is a minor improvement from the 0.5 per cent 2011 contraction followed by 0.8 per cent growth that it forecast in January.