Dragged down by a dismal first quarter in the United States, the global economy is expected to grow at a slightly slower pace this year, the International Monetary Fund said Thursday.
Still, the quarterly forecast was largely upbeat despite the Greek debt crisis and turmoil in China's financial market.
The IMF projected the world's economy to grow 3.3% this year, down from a 3.5% estimate in April.
But the forecast remained for an improvement to 3.8% next year because "the underlying drivers for a gradual acceleration in economic activity in advanced economies — easy financial conditions, more neutral fiscal policy in the euro area, lower fuel prices and improving confidence and labor market conditions — remain intact," the IMF said.
The report raised some concerns about the potential impact of failure for Greek and European leaders to reach agreement on a new bailout. But the IMF said the risks to Europe and the broader world economy could be mitigated if a deal can be struck.
"Developments in Greece have, so far, not resulted in any significant contagion," the report said. "Timely policy action should help to manage such risks if they were to materialize."
The poor U.S. performance in the first three months of the year, when the economy contracted at a 0.2% annual rate, was the main reason for the downgrade in the global outlook this year.
The IMF sharply lowered its forecast for U.S. growth this year to 2.5% from the April estimate of 3.1%.
Economic growth in the U.S. is expected to pick up next year to 3%, which is 0.1 percentage point lower than the April forecast.
"One-off factors, notably harsh winter weather and port closures, as well as a strong downsizing of capital expenditure in the oil sector contributed to weakening U.S. activity in the first quarter," the IMF said.
The U.S. problems spilled over into Canada and Mexico, the report said. The forecast for growth in advanced economies was downgraded to 2.1% this year from 2.4% in April.
Emerging market economies are expected to expand by 4.2% this year, down 0.1 percentage point from the spring estimate.
Growth in emerging markets has slowed because of lower prices for oil and other commodities, tighter financial conditions and China's attempts to reform its economy.
Among the risks to the global economy are "greater difficulties in China's transition to a new growth model, as illustrated by the recent financial market turbulence," the IMF said.
Still, despite a major sell-off in China's stock market in recent weeks, the IMF said that nation's economy would grow 6.8% this year. That is the same as the April forecast. Growth in China is expected to slow to 6.3% next year.