The IMF forecast marked a dramatic downgrade of previous estimates and set the tone for the meetings of the top steering committees of the 185-member IMF and World Bank.

Crisis 'easing'

But on Friday, the G7 major economies said the worst might finally be over although the outlook remained grim and difficult.

"Without underestimating the challenges we still face, there are  signs that the pace of deterioration in economic activity and trade flows has eased"

Timothy Geithner, the US treasury secretary

"Recent data suggest that the pace of decline in our economies has slowed and some signs of stabilisation are emerging," a G7 statement said.

"Economic activity should begin to recover later this year amid a continued weak outlook and downside risks persist."

The G7 said they were "committed to act together to restore jobs and growth and to prevent a crisis of this magnitude from occurring again".

The G7 comprises the US, Britain, Canada, France, Germany, Italy and Japan.

Timothy Geithner, the US treasury secretary, said that "without underestimating the challenges we still face, there are  signs that the pace of deterioration in economic activity and trade flows has eased."

He cautioned against any simple optimism that the worst global slump since the 1930s would be over quickly.

"We are right to be somewhat encouraged but we would be wrong to conclude that we are close to emerging from the darkness that descended on the global economy (in September)," he said in a statement.

Protests planned

Security was tight around the IMF headquarters in the US capital, where several demonstrations were scheduled to take place on Saturday.

Global Justice Action, an anti-capitalist group, called on activists "to blockade delegates" and "strategically occupy space" during the Saturday and Sunday talks.

The aim was "to send a clear message to the architects of the globalised economy: 'Capitalism isn't in crisis ... Capitalism is the crisis,'" a statement said.

"The policy makers who have led us into a global recession culminating in mass unemployment, homelessness and food shortages should not be allowed to nurse their institutions back to health at the taxpayers' expense."

A few blocks from the meeting, about 100 protesters clashed with police, who dispensed pepper spray into the crowd.

Police arrested one protester.