The Bank for International Settlements said Sunday the global economy risked a "relapse" of the crisis that rocked it a decade ago, warning there was little "medicine" left to treat the patient a second time.
"Things look rather fragile," BIS chief economist Claudio Borio told reporters in a conference call.
"There is little left in the medicine chest to nurse the patient back to health or care for him in case of a relapse," he warned.
The Basel-based BIS, considered the central bank for central bank, warned in its annual report that the recovery after the 2007-2008 global financial crisis had been "highly unbalanced," with emerging economies especially facing mounting pressure.
Borio pointed out that central banks around the world had for years been administering "powerful medicine" to counter the effects of the crisis, with "unusually and persistently low interest rates."
This, he said, had helped boost economic activity, "but some side effects were inevitable."
He pointed for instance to the crises that have recently erupted in Argentina and Turkey, describing them as "withdrawal symptoms" as the central banks start cutting back the dosage.
After years of ultra-accommodating monetary policy, the US Federal Reserve has begun hiking interest rates, while the European Central Bank (ECB) recently announced it would end its stimulus programme at the end of this year.
But amidst this normalisation process, BIS noted a stark divergence between growth in the US market and the situation in emerging economies especially.
On average, Borio said, global financial markets were doing well.
But, he warned, "the average was not particularly meaningful. It was a bit like that proverbial person whose temperature, on average, was fine, except that their head was on fire and their feet freezing."
Asset prices in emerging economies have been hit by a stronger dollar, as well as growing global trade tensions, BIS said.
Signs of a slowdown in the Chinese economy, which has become increasingly critical for commodity producers, were also hitting emerging economies hard, it said.
At the same time, risky lending similar to what landed the world in the global financial crisis a decade ago is on the rise.
Borio pointed out that US-dollar-lending to non-banks in emerging economies "has actually more than doubled since the Great Financial Crisis to some $3.7 trillion."
And he pointed out that this number does not even include borrowing through so-called foreign exchange swaps, "which could easily be of a similar order of magnitude."
Borio also voiced concern about the situation in the United States, pointing to the "red-hot" leveraged loan market, with banks "off-loading their loans onto an eager investor base."
Some of the loans, he said, were off-loaded via collateralised loan obligations (CLOs), which are "close cousins" of the infamous instruments known as collateralized debt obligations, or CDOs, and securities backed by residential mortgages, which sparked the 2008 crisis.
But Borio stressed the future was hard to foresee.
"Will the patient continue to mend, as looked likely until the first quarter of this year, or will there be a relapse?" he asked.
"What one can say is that the patient's full recovery will not be smooth... Policymakers and market participants should brace themselves for a lengthy and eventful convalescence."