THE International Monetary Fund (IMF) has trimmed its forecasts for this year's and next year's world economic growth, largely due to a marked worsening in the outlook for the euro zone, a G-20 finance official told Reuters.

With a sharp US economic slowdown starting to spill out into other regions, the official said the IMF had downgraded its world growth forecast for this year to 3.9 per cent, down from 4.1 per cent in its World Economic Outlook (WEO) last month.

It projects next year's growth as 3.7 per cent, down from 3.9 per cent, in a note prepared for a meeting of deputy finance ministers of the Group of 20 (G-20) emerging and industrialised economies this Saturday.

The IMF left unchanged its forecast for this year's US growth at 1.3 per cent and shaved its outlook for next year's growth to 0.7 per cent from 0.8 per cent.

However, it was more downbeat in its new forecasts about the prospects for the euro zone economy.

It cut its forecast for euro zone growth this year to 1.4 per cent from the 1.7 per cent predicted and estimated next year's growth at 0.9 per cent, down from 1.2 per cent, said the official who spoke on condition of anonymity.

The Reuters story helped euro zone government bonds extend gains as traders viewed the new IMF forecasts as more evidence that the European Central Bank (ECB) faces mounting risks to growth, which will prevent it from raising interest rates.

The ECB has acknowledged that risks to economic growth are increasing but, with inflation near record highs, it is widely expected to leave interest rates unchanged at 4.25 per cent this year.

The IMF's assessment of the world economy will be finalised when it issues its WEO in Washington in October.