The fund's latest World Economic Outlook update, published overnight, forecast world real gross domestic product growth of about 4.5 per cent this year and next, down from 5per cent last year.

''In Australia, flooding in key mining and agricultural regions is expected to subtract from growth in early 2011, but over the year this will be offset by stronger private investment in mining and stronger commodity exports,'' it said.

It projects economic growth of 3per cent in Australia this year and 3.5 per cent in 2012 well above the 2.5per cent predicted for advanced nations. Inflation is expected to be steady at 3per cent, the top of the Reserve Bank's target of 2-3per cent.

Unemployment which fell to 4.9per cent in March was tipped to be 5per cent this year, dropping to 4.8per cent next year.

Treasurer Wayne Swan, who leaves today for the Group of 20 finance ministers' meeting and IMF and World Bank meetings in Washington, DC, said Australia's natural disasters would likely cut growth by 0.75 of a percentage point in 2010-11, but the budget would still return to surplus in 2012-13.

Fund economist Olivier Blanchard said fears of a global double-dip recession had gone, but concern had turned to commodity prices.

''Commodity prices have increased more than expected, reflecting a combination of strong demand growth and supply shocks. Although these increases conjure up the spectre of 1970s-style stagflation, they appear unlikely to derail the recovery,'' he said.

The report said unrest in the Middle East and North Africa had increased the downside risks relative to the January update.

''The key downside risk to growth relates to the potential for oil prices to surprise further on the upside because of supply disruptions,'' it said.

Real GDP would be cut by 0.75 per cent in advanced economies in 2012 if oil prices hit $US150 a barrel this year, even if they returned to average levels next year.