Global growth is expected to increase slightly this year while remaining stuck below its pre-pandemic average, the IMF said on Friday, flagging the growing economic divide between the United States and European countries.

In an update to its flagship World Economic Outlook report, the International Monetary Fund said it expects global growth to hit 3.3 percent this year, up 0.1 percentage point from its previous forecast in October, and to remain at 3.3 percent in 2026.

"Growth is steady," IMF chief economist Pierre-Olivier Gourinchas told reporters, adding it remained below the average global growth rate in the first two decades of the 21st century of 3.7 percent.

The IMF expects the global inflation rate to continue decelerating, reaching 4.2 percent this year and 3.5 percent in 2026, with prices cooling faster in advanced economies than in emerging markets.

"Among advanced economies, the interesting development here is the strength and resilience and growth of the US economy," Gourinchas said, pointing to the IMF's decision to hike its outlook for US growth to 2.7 percent in 2025 and to 2.1 percent in 2026.

"The labour market has been strong, there is strong demand, private demand is robust, there is good confidence," he said.

The IMF expects China's growth rate to continue cooling this year to 4.6 percent, up 0.1 percentage point from the October forecast, before easing to 4.5 percent next year.

The slight upgrade was due to the Chinese government's recently announced package of fiscal support to help prop up the economy, amid an ongoing property market slump and uncertainty about trade policy once Donald Trump takes office next week.

The slowdown in growth in the world's second-largest economy is leading to something of a "rebalancing" among emerging markets, Gourinchas said, with countries including India -- which the IMF expects to grow by 6.5 percent this year and next -- playing a more important role.

Growth in the Middle East and Central Asia is expected to pick up by less than previously forecast due largely to the effect of oil production cuts by the Opec+ group of oil-producing nations, which includes Saudi Arabia.

One of the risks to the IMF's forecasts is policy uncertainty in the United States, where Trump is preparing to return to the White House and has threatened to unleash tariffs on a host of nations including China.

Still, the economic picture in America stands in stark contrast to the Euro area, where a sharp downgrade for Germany has dampened expectations for a rebound in growth.

The IMF now sees Euro area growth to increase slightly to 1.0 percent this year, and 1.4 percent in 2026, below its October forecasts. (AFP)