By David Schepp BBC News Online's North America Business Reporter

The International Monetary Fund (IMF) has revised upward its estimate of worldwide economic growth to 2.8% in 2002 in response to the recovery underway in the US.

"Happily, we are anticipating that the global economy will enjoy a recovery in 2002," said Kenneth Rogoff, director of research at the IMF.

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"The recovery is expected to be lead by the United States."

The IMF expects US economic growth to rise by 2.3% in 2002 - up from its previous 0.7% - and 3.4% in 2003.

Europe, meanwhile, can expect milder growth rates in part because the economic downturn there was limited.

The IMF estimates European economic output will advance by 1.5% in 2002 and 2.9% in 2003.

In Japan, however, economic recovery is expected to be fragile.

The IMF expects the Japanese economy to contract in 2002 by a full percentage point, before recovering in 2003 to achieve 0.8% expansion.

The IMF detailed its forecasts in its April World Economic Outlook (WEO), a comprehensive report on the economies of the world.

Recession?

The IMF in its report credited the speedy recovery of the US economy to quick and aggressive action on the part of the US central bank, the Federal Reserve.

In response to the recession, US monetary policy makers, led by Federal Reserve chairman Alan Greenspan, lowered interest rates a record 11 times in 2001, sending rates to their lowest level in nearly 40 years.

In issuing his assessment on Thursday, Mr Rogoff said the European Central Bank's (ECB) decision to hold steady on its fiscal policy helped contribute to the economic turnaround.

He also conceded there had been much debate as to whether the economic slowing seen in much of the world in 2001 could be termed a recession.

The National Bureau of Economic Research (NBER) determined the US entered recession in March 2001.

IMF data, however, revealed that 2001 was not a year of recession for the global economy.

But it was a matter of semantics whether to call the recent downturn a severe economic slowdown or a mild global recession, Mr Rogoff added.

Economic woes

Even as the world lending body issued its generally positive outlook it warned of possible shocks from future terrorist attacks - such as those of 11 September - and rising oil prices.

The IMF's latest outlook is generally positive

Another significant concern for the IMF was the US current account deficit, a broad measure of the flows of trade and investment income, which may result in "significant exchange rate changes".

For 20 years, the US has run a deficit because it imports more than it exports, and because investors have poured money into the country.

Mr Rogoff warned the current level of the deficit - about 4% of the US gross domestic product (GDP) - could prove problematic if sustained.

Debt crises

In its report, the IMF also warned that Argentina and Japan still faced difficult times ahead in countering their economic woes.

Japan is mired in a 10-year recession, while Argentina has endured an economic crisis caused by the devaluation of its currency, the peso, earlier this year.

Mr Rogoff said little about the ongoing situation in Argentina, as IMF officials are currently evaluating its latest response to the country's economic crisis.

He did note, however, that the spill over from Argentina's economic woes into other Latin American countries was thankfully small, due in part to Argentina's minimal trade links with other developing nations.

On the other hand, Latin American nations' lack of trade leaves them susceptible to debt crises, leaving them unable to pay creditors.

Low inflation

Japan, meanwhile, must move to depreciate its currency, the yen, if its economic situation fails to improve, Mr Rogoff said.

He said the IMF would not be as concerned about yen depreciation, if Japan's monetary officials adopted strict structural reforms, including ongoing problems within its banking and corporate sectors.

Japan economic woes are further complicated by deflation, a sustained decrease in prices and wages, which, Mr Rogoff said, the Bank of Japan must "aggressively address".

Japan is the only major economy facing a chronic deflationary problem. Most other countries must deal with rising prices, although the IMF said rich nations can expect record low inflation rates this year and in 2003.

Its report forecasts rates of 1.3% - the lowest on record - in 2002 and 1.8% in 2003 for industrialised nations.

Developing countries face much higher rates of inflation - 5.8% in 2002 and 5.3% in 2003, although there are still low by historical standards, Mr Rogoff said.