Canada’s economy will grow by 2.8 per cent this year, up from an earlier forecast of 2.3 per cent, the International Monetary Fund said yesterday as it warned the world is facing new threats from surging oil prices, Mideast turmoil, higher inflation in China and Europe’s debt woes.

In the face of these challenges, the IMF lowered its expectations for Canada for 2012 to 2.6 per cent compared with 2.7 per cent in an earlier forecast. The Canadian economy grew 3.1 per cent in 2010.

Meanwhile, the global economy should grow 4.4 per cent this year. That compares with growth of five per cent last year. The IMF projects industrial countries will grow 2.4 per cent while developing countries will grow at 6.5 per cent.

Olivier Blanchard, the IMF’s chief economist, said it is critical for countries running large government deficits, such as the United States, to make progress in getting those deficits under control.

At the same time, countries with large trade surpluses, such as China, need to boost domestic demand and not rely so heavily on exports to generate growth.