(Updates with details)

June 11 (Reuters) - Guatemala's economy is expected to expand by 4.5% this year according to a projection from the International Monetary Fund (IMF) released on Friday, as Central America's biggest market begins to recover from a pandemic-induced slump.

The Washington-based international lender sees 2021 growth prospects bolstered by a U.S. economic recovery, though it also cited downside risks including sluggish coronavirus vaccine distribution and the possible impact of new strains of COVID-19.

In a statement, the IMF said it expects further expansion of the Guatemalan economy of 4.0% in 2022 followed by 3.5% growth in 2023, when it is seen recovering to pre-pandemic levels.

Guatemala's economy fared better last year than many others, contracting by only 1.5%, due to a favorable mix of domestic production and exports, robust remittances and "unprecedented monetary and fiscal policy support," the IMF said.

The IMF also praised Guatemala's pandemic response, which it said allowed for an earlier reopening of the economy, and recommended that the government boost "much needed" social and infrastructure spending going forward. (Reporting by Diego Ore Editing by Alistair Bell)