The International Monetary Fund (IMF) has predicted global growth to strengthen gradually this year as constraints on economic activity start to ease.
In its recent update of World Economic Outlook (WEO), the fund, however, says because the recovery is slow, it is important to promote policies that will help address downside risks to bolster growth.
The IMG added that if crisis risks do not materialise and financial conditions continued to improve, global growth could even be stronger than forecast.
The fund's update report released in Accra, Ghana on Thursday projected global growth to strengthen to 3.5 percent in 2013 from 3.2 percent in 2012.
Policy actions in the euro zone and the United States, the report notes have lowered acute crisis risks.
It added Japan's stimulus plans will help boost growth in the near term, pulling the country out of a short-lived recession.
The Bretton Woods institution admitted, however that downside risks remained significant, including prolonged stagnation in the euro zone and excessive short-term fiscal tightening in the United States.
It also indicates that effective policies have also helped support a modest growth pickup in some emerging markets and developing economies.
In the third quarter of 2012, the report says economic conditions improved slightly on the back of strong performances in emerging market economies and the United States.
Financial conditions also improved as borrowing costs for countries in the euro zone periphery fell, and many stock markets around the world rose.
But activity in the euro zone periphery was even softer than expected, with some of that weakness spilling over to the euro area core.
Again the report observes that even though policy actions had reduced risks and improved financial conditions for governments and banks in the periphery economies, those had not yet translated into improved borrowing conditions for the private sector.
It cited the continuing uncertainty about the ultimate resolution of the global financial crisis despite continued progress in policy reforms.
Given that the euro zone continues to pose a large downside risk to the global outlook, the IMF said "the risk of prolonged stagnation in the euro area would rise if the momentum for reform is not maintained".
To head off this risk, it says adjustment programmes by the periphery countries need to continue and must be supported by the deployment of "firewalls" to prevent contagion as well as further steps towards banking union and fiscal integration.