During its first meeting of the year, the fund predicted growth of 3.4 percent in 2016, rising to 3.6 per cent in 2017.

IMF economic counselor Maurice Obstfeld says the global economy faces multiple challenges, highlighting emerging markets and oil.

"We may be in for a bumpy ride this year especially in the emerging and developing economies. Fundamental to the current global conjunctures are the same three forces we highlighted last October: China's slower growth and rising financial market risks amid a process of macroeconomic rebalancing away from traditional industry and construction towards services and consumption; the fall in commodity prices, notably the price of oil; and asynchronous trends in monetary policy mainly between the US and most other advanced economies."

The IMF maintained its previous China growth forecast of 6.3 percent in 2016 and 6.0 percent in 2017.

The Fund said the outlook for an acceleration of U.S. output was dimming as dollar strength weighs on manufacturing and lower oil prices curtail energy investment.

It now projects U.S. economic growth at 2.6 percent for both 2016 and 2017, down 0.2 percentage point in both years from the October forecast.

The economist notes that political and geopolitical risk create uncertainty and volatility in financial markets, and could possibly disrupt global trade.

"Finally, political and geopolitical risks have intensified not receded in recent months. Prominent among these: refugee outflows from Syria and Iraq are imposing extreme burdens on neighbouring countries and has spilled over into Europe, sparking political discord within the European Union and threatening its current framework for free labour mobility."

Obstfeld says the Fund is encouraging monetary policy to remain expansive in some countries, such as Japan and across Europe.