The world economy is facing more risks than it did a few months ago, according to the head of the International Monetary Fund (IMF).

The global economy has shown remarkable resilience in the face of multiple shocks

Horst Koehler IMF

But Horst Koehler said the IMF still expected the world recovery to continue.

He made his comments in a speech in advance of the IMF's annual meeting in Washington next week.

He said that the US should avoid falling back into chronic overspending.

And he warned that Europe and Japan should do more to bolster their economic growth prospects.

Recovery still on the cards

"The global economy has shown remarkable resilience in the face of multiple shocks over the past two years," Mr Koehler said.

The United States should beware of falling back into chronic public sector deficits

Horst Koehler IMF

"Nevertheless, we need to be concerned about the strength and durability of the ongoing economic recovery, and the stability of the international financial system," he added.

In a speech to the Council on Foreign Relations he said: "Risks to the global economic outlook today are clearly tilted more to the downside than they were a few months ago.

"On balance, we do still expect that the recovery will continue," he added.

Warning to governments

Mr Koehler said the heightened risks included the continued fallout from the collapse of the equity bubble, corporate scandals that have undermined investor confidence, crises in some emerging economies such as Brazil and Argentina, regional political tensions and volatility in world oil prices.

We have a responsibility to speak out when countries live too long beyond their means

Horst Koehler IMF

He said it was crucial for leading economies to take steps to boost confidence, including steps to improve accounting standards and stamp out corporate corruption.

He warned: "The United States should beware of falling back into chronic public sector deficits.

"Europe and Japan have to be more serious about accelerating structural reforms, to unlock self-sustained growth."

He also said Japan "should act decisively to bring an end to deflation" and more work was needed to bring a successful conclusion to the latest round of world trade talks.

'A responsibility to speak out'

The IMF's managing director also used his speech to talk about reform of the IMF.

He said the IMF should act as a whistle-blower on countries that are going astray.

It is the first time he has said this in public and he was speaking about a measure that the Bush administration has been seeking.

"We have a responsibility to speak out when countries live too long beyond their means, not least because the poor suffer most from disorderly adjustment, high inflation and volatility," Mr Koehler said.

Critics have said that if the IMF had blown the whistle on Argentina earlier, it would have been forced to restructure its debts earlier and its financial crisis would not have been so severe.