The US will remain the main engine of growth for the global economy, but it has no clear plan for controlling its swelling budget deficit, the International Monetary Fund (IMF) has warned.

Leaked drafts of the IMF's twice-yearly world economic outlook, due to be released at its meetings in Dubai next month, show upward revisions to US growth predictions and a sharp downgrading of growth prospects in the euro zone.

The IMF is also sceptical that the recovery in the Japanese economy can be sustained, deciding against an upward revision of its anaemic forecast of 1 per cent for growth next year.

The IMF says that growth in Asian countries outside Japan has held up well.

But in a separate part of the report, the IMF is preparing criticism of Asian economies for building massive dollar reserves that are well beyond the levels needed to back fixed or managed exchange rate systems.

Central banks in the large Asian economies, including China, Taiwan and South Korea, have bought hundreds of billions of dollars in US assets since the end of the Asian financial crisis in 1998.

The IMF report is expected to say that, while fiscal stimulus has played a role in keeping the US economy going, the administration has no strategy for returning public finances to balance in the medium term.

Leaked accounts of the IMF forecast were first published in Italian newspapers and Italian-based wire services yesterday.

The reports said the IMF was set to trim its forecast for eurozone growth this year from 1.1 per cent to 0.7 per cent.

The reports also said that its global growth forecast had been reduced from 3.2 to 3.1 per cent this year.

According to leaked reports, the IMF is also set to trim its forecast for growth in the euro zone next year, down to 1.9 per cent, compared with an earlier forecast of 2.3 per cent.

The IMF was reported to have delivered an especially gloomy outlook for Germany, cutting its forecast for GDP growth to zero in 2003 from an April forecast of 0.5 per cent.

It predicts growth of 1.5 per cent for Germany in 2004, but says Europe's largest economy faces a mild decline in prices. The IMF cut the forecast for France to 0.8 per cent for this year, from 1.2 per cent, and sees 1.9 per cent growth next year.

It also said the resilience of Germany's financial sector was additionally threatened by continued economic weakness.

The draft says monetary policymakers in industrial nations should continue to support the economic upturn and urges the European Central Bank (ECB) to "take account of the fact that negative developments in individual countries can potentially influence the entire currency area".

The IMF officially declined to comment on the veracity of these accounts yesterday, but other international finance officials said that the numbers circulating in Italy were out of date.

The most recent numbers show global growth unchanged from the IMF's April forecast at 3.2 per cent for this year, compared with the leaked draft showing 3.1 per cent.

US growth forecasts have been revised further above the April number of 2.2 per cent for 2003 and 3.6 per cent for 2004, with a downgrade in euro-zone growth, which the fund says will come in well below 1 per cent this year.