Australia is on its way to solid economic growth this year and by the following year even as worldwide growth is heading towards a downside risk as the renewed financial turbulence continued to intensify, that according to the International Monetary Fund (IMF) which released its World Economic Outlook Update on Thursday.

The IMF also revised its world growth forecast for 2010 saying that the upgrade was due to much stronger activity during the first half of the year and the new projections "hinge on implementation of polices to rebuild confidence and stability, particularly in the euro area."

The IMF statement, which was released in Hong Kong effectively re-echoed the sentiments voiced out by both the Reserve Bank of Australia (RBA) and Deputy Prime Minister Wayne Swan in the past few days, which offered a gloomy economic outlook specifically in Europe.

RBA's decision this week to pause for a cash rate increase for July has prompted many economists to speculate that the country's central bank would be less inclined to spike up the interest rate, at least in the near term, as markets environments remain uncertain due to developments in Europe's debt crisis.

The IMF lauded Australia's strong commodity prices which boosted the country's private domestic demand and by that, growth of up to 3.0 percent would be seen by 2010 with further accelerations of up to 3.5 percent in 2011.

It also upgraded its world growth forecast to 4.6 percent in 2010, coming from the 4.2 percent earlier set though its original growth forecast of 4.3 percent for 2011 remains the same.

The IMF said that encouraging development in Asia, largely dominated by China and India, spurred and upgraded forecast of 9.2 percent in the same year, coming from the previous projections of 8.7 percent while the recent financial woes seen in the continent resulted to a downgrading of 8.5 percent for 2011 as opposed to the original forecast of 8.7 percent.

The world financial institution said that the unstable developments in Asia were mostly due to its economies too much dependence on external demands resulting to most countries exports in the region becoming vulnerable to the ensuing crises in Europe ad the United States.

Also, the IMF's corresponding update, the Global Financial Stability Report, stated that the targeted progress toward financial stability suffered a setback in late April and May which resulted to an environment of uncertainty as "banks again have become less willing to lend to one another, especially to banks in the euro area countries perceived to be facing greater policy challenges."

Overall, the IMF reiterated that while risks on most affected markets had subsided over the past months, the global market confidence remains weak.