The IMF will soon have a new leader

In its twice-yearly World Economic Outlook report, the IMF said global growth would hit 4.6% in 2004, up from an earlier forecast of 4.1%.

The Fund predicted that growth would fall back to 4.4% next year.

It also urged its member governments to join forces in an effort to fix what it called potentially risky "global imbalances".

These include a yawning budget deficit in the US, persistently sluggish growth in the eurozone, and a heavily indebted banking sector in Japan.

Terror threat

The IMF warned that interest rates were likely to start rising in most major economies as the recovery gathers pace.

It added that reversals in the US-led military operations in Iraq and Afghanistan, or more terrorist bombings in the west, could also halt global growth in its tracks.

But if governments and central banks managed their economies smoothly, and provided there were no fresh terror attacks, the world economy was set to grow strongly, it said.

"The tentative buds that we saw six months ago are now blooming in many parts of the world," said IMF chief economist Raghuram Rajan.

"If all goes as expected, we are in for the best two years in over a decade."

The latest report comes as the IMF awaits the appointment of a successor to its former managing director, Horst Koehler.