The latest International Monetary Fund (IMF) World Economic Outlook update, released Tuesday, Jan. 26, indicates that it expects the global economy to expand 3.9 percent year-over-year in 2010, compared with its October projection of 3.1 percent.

The new projection reflects an upward revision of almost 1 percentage point.

In 2011, output is projected to accelerate further.

The IMF expects U.S. gross domestic product (GDP) to expand 2.7 percent this year before slowing to 2.4 percent in 2011.

The euro zone is expected to grow 1 percent in 2010 and 1.6 percent in 2011.

Growth in emerging and developing economies is expected to rise to about 6 percent in 2010, following a modest 2 percent in 2009.

The IMF sees China to grow 10 percent in 2010 and 9.7 percent in 2011, while it expects Association of Southeast Asian Nations, or Asean-5, to grow 4.7 percent in 2010 and 5.3% in 2011.

It also sees Brazil to grow 4.7 percent in 2010 and 3.7 percent in 2011.

It expects growth performance to vary considerably across countries and regions, reflecting different initial conditions, external shocks, and policy responses.

The IMF expects consumer prices rising 1.3 percent in 2010 and 1.5 percent in 2011 in advanced economies and 6.2 percent in 2010 and 4.6 percent in 2011 in emerging and developing economies.

In my opinion, we could see a situation of “decoupling” inflation on the upside in emerging and developing economies due their more limited economic slack and increased capital flows.

Investors should put that on their radar screen because, if that would occur, it would be a negative for emerging and developing economies that’s certainly not been taken into account for the moment.

The IMF update also states that regarding monetary policy, many central banks can afford to maintain low interest rates over the coming year, as underlying inflation is expected to remain low and unemployment high for some time.

At the same time, credible strategies for unwinding monetary policy support need to be prepared and communicated now to anchor expectations and dampen potential fears of inflation or renewed financial instability.

Countries that are already enjoying a relatively robust rebound of activity and credit will have to tighten monetary conditions earlier and faster than their counterparts elsewhere.

Key risks to a global sustainable recovery are:

Firstly, a premature and incoherent exit from supportive policies may undermine global growth and its rebalancing.

Secondly, impaired financial systems and housing markets or rising unemployment in key advanced economies like the United States may hold back the recovery in household spending more than expected.

In addition, rising concerns about worsening budgetary positions and fiscal sustainability could unsettle financial markets and stifle the recovery by raising the cost of borrowing for households and companies.

Thirdly, the risk is still out there that rallying commodity prices may constrain the recovery in advanced economies.

Bottom line: As a group, advanced economies will underperform, remaining sluggish, but emerging and developing economies will be “relatively vigorous, largely driven by buoyant internal demand.”

However, much of the boost has been policy-induced, and in advanced economies there are few signs of non-stimulus-related private demand.

Watch the second half of 2010 for a real indication for where we’re going.

One thing is for sure, it won’t be business as usual.

Everyone, without exception, will have to adapt a lot to lower-than-usual growth.