The International Monetary Fund is set to cut its global growth forecast, warning there are still significant risks to a budding economic recovery, but leave its US outlook unchanged.

The IMF plans to trim its 2003 global growth forecast to 3.1 per cent from 3.2 per cent, keep its US outlook unchanged at 2.2 per cent and cut its forecasts for Germany and the euro zone, according to a summary of a draft report obtained by Reuters.

In its draft World Economic Outlook, due to be submitted at the annual meetings of the IMF and World Bank in Dubai next month, the IMF sees global economic growth accelerating in the second half of 2003 and reaching 4.0 per cent in 2004, with US growth seen at 3.6 per cent next year.

However, the draft cuts the euro zone growth forecast to 0.7 per cent in 2003 from 1.1 per cent, with 1.9 per cent growth seen in 2004, and warned there were a number of downside risks to a global economic recovery.

They included:

-- uncertain after-effects of the burst stockmarket bubble on investment in industrial nations;

-- the high US current account deficit which harbours the danger of a 'disorderly' adjustment of exchange rates;

-- a strong rise in real estate prices in some industrial nations;

-- continued vulnerability of highly indebted emerging economies to a deterioration in financing conditions on international capital markets;

-- particular risks for Japan and, to a lesser extent, Germany.

The draft raises the Japan forecast to 1.1 per cent from 0.8 per cent for 2003 with 0.8 per cent growth seen in 2004.

It warns of a risk of "disorderly" exchange rate movements resulting from the high US current account deficit.

It also sees the US budget deficit reaching 6.1 per cent of gross domestic product in 2003, with a structural deficit of 5.2 per cent of GDP, and expects only a slight decline in 2004.

It says "unprecedented" monetary and fiscal policy stimulus could boost US growth in 2004 beyond its 3.6 per cent forecast, but reproaches the country for its fiscal indiscipline.