WASHINGTON, CMC - As the Caribbean reels from the global economic crisis, the International Monetary Fund (IMF) predicts that growth will “strengthen gradually” this year.

In an update to its World Economic Outlook (WEO), the Washington-based financial institution said the constraints on economic activity will start to ease this year.

The IMF projected a 3.6 per cent growth in Latin America and the Caribbean this year, compared to three per cent last year.

It said that growth in the region will increase to 3.9 per cent next year, even as it noted that the recovery would be “slow” and urging that policies “address downside risks to bolster growth”.

The report notes that policy actions have lowered “acute crisis risks” in the Eurozone area and the United States, adding that Japan’s stimulus plans will help boost growth in the near term, pulling the country out of a short-lived recession.

The report also says that “effective policies” have also helped support a modest growth pickup in some emerging market and developing economies, such as those in the Caribbean.

The IMF said recovery in the United States “remains broadly on track,” with global growth projected to strengthen to 3.5 percent this year, from 3.2 per cent in 2012 “a downward revision of just 0.1 percentage point compared with the October 2012.

“If crisis risks do not materialize and financial conditions continue to improve, global growth could even be stronger than forecast,” the IMF said, warning that downside risks “remain significant, including prolonged stagnation in the Euro area and excessive short-term fiscal tightening in the United States”.

The IMF said 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 the report says activity in the “Euro area periphery was even softer than expected, with some of that weakness spilling over to the euro area core,” adding that Japan moved into recession in the second half of last year.

The IMF downgraded its near-term forecast for the Euro area, with that region now expected to contract slightly in 2013.