The IMF last week announced sharp downgrades of its global growth forecasts made just a few months earlier, reflecting the speed of the global downturn.

IMF Managing Director Dominique Strauss-Kahn told reporters on Tuesday in a webcast from Washington that Asia needed to boost household demand to reduce its traditional reliance on exports to the United States and Europe, but such a shift would not happen overnight.

"It's impossible for Asia to have a recovery while the rest of the world is in bad shape."

Most Asian economies are reliant on demand from the likes of the United States and Europe, which are both mired in recession. In recent weeks, both South Korea and Japan, home to some of the world's top manufacturers, have reported record falls in exports. The IMF sees Asia growing just 2.7 per cent this year, down from a November forecast of 4.9 per cent.

"It's very uncertain. A worse outcome can not be ruled out. There's some upside risk but there's a lot of downside risk," Strauss-Kahn said.

Asia's economies are likely to grow at an average rate of more than 5 per cent next year with growth in some countries set to pick up quickly once the environment improves, he said.

China, Asia's second-biggest economy after Japan, could still hit the government's target for 8 per cent growth in gross domestic product this year but this would be a big challenge, Strauss-Kahn said, adding that China was of "tremendous importance" to the world economy.

"In China, we see some scope for even more fiscal stimulus."

In November, China announced a fiscal stimulus plan to spend 4 trillion yuan ($584 billion) on infrastructure and other projects. Strauss-Kahn reiterated that China's currency, the yuan, was undervalued but that the country's focus should be on economic recovery for the time being.

In its latest forecast, the IMF expects China's economy to expand by 6.7 per cent this year, slowing sharply from 9.0 per cent in 2008.

In a grim assessment of the world economy, the IMF last week slashed its 2009 forecast for global growth to a slight 0.5 per cent, the weakest pace since World War Two, from a November estimate of 2.2 per cent.

The IMF also said on Tuesday it had sharply donwgraded its growth forecast for South Korea to a contraction of 4 per cent from 2 per cent growth this year but said the export-dependent economy, Asia's fourth-largest, would return to growth of 4.2 per cent in 2010 as the global economy recovers.

The revised forecast would mark the economy's poorest performance since contracting 6.9 per cent in 1998, a year after the country barely averted insolvency with an international bailout of nearly $60 billion. It stands in sharp contrast to the 2 per cent growth forecast by the country's central bank.

Figures released by South Korea's Finance Ministry on Tuesday also showed that the IMF expects Mexico's economy to contract by 0.3 per cent this year, a downgrade from its previous forecast for growth of 0.9 per cent.