World economy to strengthen modestly in 2013: IMF

The International Monetary Fund (IMF) said Wednesday that the world economy stands poised for a gradual upturn in 2013 with output rising by 3.5 percent.

The estimate marks a modest uptick from 3.2 percent in 2012, but was slightly lower than the IMF's last projection.

"Global growth is projected to increase during 2013, as the factors underlying soft global activity are expected to subside," the IMF said in its updated World Economic Outlook, a twice-yearly flagship report.

The 188-member institution said policy actions have lowered acute crisis risks in the euro area and the United States. But in the euro area, the return to recovery after a protracted contraction is delayed.

Advanced economies were expected to grow at a rate of 1.4 percent in 2013, a 0.2 percentage point downward revision from the projection made in October 2012.

The IMF expects economic activity in the euro zone, which is still a large source of downside risk to the global outlook, to contract by 0.2 percent in 2013.

The U.S. economy is forecast to advance 2 percent in 2013 on the assumption that the spending sequester will be replaced by back-loaded measures.

Growth in emerging market and developing economies is projected to accelerate from 5.1 percent in 2012 to 5.5 percent in 2013 as supportive policies have underpinned much of the recent acceleration in many economies.

China's growth rate is expected to pick up to 8.2 percent in 2013 from 7.8 percent in 2012.

The IMF cautioned that weaknesses in advanced economies will weigh on external demand, as well as on the terms of trade of commodity exporters.

"If crisis risks do not materialize and financial conditions continue to improve, global growth could be stronger than projected," the IMF said.

"However, downside risks remain significant, including renewed setbacks in the euro area and risks of excessive near-term fiscal consolidation in the United States. Policy action must urgently address these risks," the IMF said.