Global growth will strengthen gradually in 2013, says the International Monetary Fund (IMF) in an update to its World Economic Outlook (WEO), as the constraints on economic activity start to ease this year.
But the recovery is slow, said the report, stressing that policies must address downside risks to bolster growth.
The report which was made available to the Ghana News Agency on Thursday said global growth was projected to strengthen to 3.5 per cent this year, from 3.2 per cent in 2012-a downward revision of just 0.1 per centage point compared with the October 2012 WEO.
If crisis risks do not materialize and financial conditions continue to improve, global growth could even be stronger than forecast, the report said.
Policy actions have lowered acute crisis risks in the euro area and the United States, the report noted.
It said Japan's stimulus plans will help boost growth in the near term, pulling the country out of a short-lived recession.
The report stressed that effective policies had also helped support a modest growth pickup in some emerging markets and developing economies.
It noted that recovery in the United States remained broadly on track, but admitted that downside risks remained significant, including prolonged stagnation in the euro area and excessive short-term fiscal tightening in the United States.
The report observed that economic conditions improved slightly in the third quarter of 2012, driven by performance in emerging market economies and the United States.
It said financial conditions also improved, as borrowing costs for countries in the euro area periphery fell, and many stock markets around the world rose; but activity in the euro area periphery was even softer than expected, with some of that weakness spilling over to the euro area core.
The IMF downgraded its near-term forecast for the euro area, with the region now expected to contract slightly in 2013.
The report observed that even though policy actions had reduced risks and improved financial conditions for governments and banks in the periphery economies, those had not yet translated into improved borrowing conditions for the private sector.
It held that continuing uncertainty about the ultimate resolution of the global financial crisis, despite continued progress in policy reforms, could also dampen the region's prospects.
The report noted that the euro area continued to pose a large downside risk to the global outlook. While a sharp crisis had become less likely, "the risk of prolonged stagnation in the euro area would rise if the momentum for reform is not maintained," the IMF said.
To head off this risk, the report stressed, adjustment programs by the periphery countries need to continue and must be supported by the deployment of "firewalls" to prevent contagion as well as further steps towards banking union and fiscal integration.
For emerging markets and developing economies, the report underscored the need to rebuild policy room for maneuver.
It noted that, "The appropriate pace of rebuilding must balance external downside risks against risks of rising domestic imbalances."
Emerging market and developing economies are expected to grow by 5.5 per cent this year, broadly as predicted in the October 2012 WEO.