The International Monetary Fund expects output growth in New Zealand of 3% in 2010 and 3.5% in 2011 to be supported by higher commodity prices, particularly for dairy products, and by stronger domestic demand.
The improved domestic demand would be on the back of higher farm income, permanent income tax cuts, and recovering house prices, the IMF said in an updated economic outlook.
Overall, the recovery under way in major advanced economies would be relatively sluggish, although Australia and the newly industrialised Asian economies were off to a strong start and would likely stay in the lead, the IMF said.
It projected Australia's gross domestic product to grow 3 percent in 2010 and 3-1/2 percent in 2011, helped by strong demand for commodities, particularly from China.
Australian growth in 2010 would be led by domestic demand, both private and public, with a pickup in commodity prices expected to boost investment in the resource sector.
Associated Press reported the IMF said that the global economy, after enduring a crippling recession, should see better-than-expected growth this year, led by strength in China and other developing nations.
It forecast the world economy would expand 4.2% this year, faster than its previous projection and a sharp improvement from 2009 when global output fell by 0.6%, the worst performance since World War II.
However, the international lending agency warned that the recovery still remained vulnerable with the biggest threat likely to come from a surge in government debt burdens.
"The outlook for activity remains unusually uncertain," the IMF said in its latest World Economic Outlook. "Although a variety of risks have receded, downside risks related to the growth of public debt in advanced economies have become sharply more evident."
For the United States, the IMF expects growth of 3.1% this year, in line with private forecasters, after a 2.4% plunge in the US gross domestic product in 2009, the biggest decline since 1946.
The IMF forecast that China's economy would surge 10 percent this year and India would grow 8.8%.
But it looked for the 16 European countries that share the euro currency to see economic growth of just 1% in 2010.
The new forecast was prepared for upcoming meetings of global financial leaders including day-long talks on Friday involving the Group of 20 nations, which include the world's richest industrial countries and major developing nations including China, Brazil, India and Russia.