Warning that the world economy is now "teetering on the brink of a severe global downturn," the United Nations said it expects growth this year to be sharply lower at 1.8 per cent - nearly half of the 3.4 per cent growth estimated only three months ago.
A new report released on Thursday predicts that slowdown will be in all regions, with South and East Asia facing a major downturn where the growth would decline to about 8.5 per cent in the current year from 11 per cent last year.
India, it says, too would face a slowdown.
The UN said the world economic growth next year would, however, get better at 2.1 per cent. The global economy expanded by 3.8 per cent in 2007.
In the African region, if the pessimistic scenario were to work out, economic growth would almost come to a standstill, down to 2.2 per cent in 2008 and 1.1 per cent in 2009, creating a major obstacle to the prospects of these countries achieving the Millennium Development Goals (MDGs).
Latin America, which did better than expected in 2007, but had close trade linkages with the United States economy, is expected to suffer strong negative impacts of lowered demands for its exports during 2008 and 2009, leading to lowered growth performance.
A worst-case scenario would see the "world economy come to a virtual standstill" if recent financial measures in the US fail to turn the economy around, and house prices continue to fall, with a severe tightening on credit, it warns.
To boost the global economy, the report calls for an internationally coordinated economic stimulus package to support US efforts, centred on the expansion of domestic demand in countries with savings surpluses especially in Europe, the Arabian Gulf and East Asia.
Releasing the new report, the economists said the global economy has been adversely impact and still threatened by deepening credit crisis in affluent countries triggered by the continuing housing slump, the declining value of the United States dollar, persisting global imbalances and soaring oil and commodity prices.
The unfolding global food crisis, the report warns, is not only a grave humanitarian issue but also a threat to political and social stability in some developing countries and may reverse some of the progress made towards the MDGs, a list of targets set by world leaders to sharply reduce or eliminate several social and economic ills.
The report issued by the UN's Department of Social and Economic Affairs says that much depends on developments in the US, which remains the prime driver of the global economy.
To counteract inflation in food prices, the economists recommend improving supply and productivity through investment in irrigation techniques, infrastructure, improved seeds and fertiliser, and agricultural research and development. This would also help shore up rural economies where most of the world's extreme poverty is located.
In addition to removing supply constraints on vital commodities, such as food, and to stimulating global demand, the mid-year report entitled: "World Economic Situation and Prospects 2008" also says that deep reforms are needed in the mechanisms of international financial regulation and supervision if new problems are to be avoided.
For the United States itself, the report forecasts a fall of 0.2 per cent in GDP compared to earlier prediction given as late as January of 2 per cent rise.
Rob Vos, Director of the Development Policy and Analysis Division of the United Nations Department for Economic and Social Affairs and author of the report, said the midyear review covered new trends and developments since the report was launched in January and that it had mainly adjusted downwards the earlier forecasts, because of continuing problems, particularly in the United States financial markets and the related slowdown in the United States economy.
The update now resembled the pessimistic scenario from the January version of the report.
The main message of the update is that a global economic slowdown should be expected in 2008 and 2009, he said. There was still a great deal of uncertainty about that, since it is not clear how long the housing and credit crisis in the United States would go on. The basic assumption is that those problems had not bottomed out yet.
The report also notes that the problems with the United States dollar had not disappeared and it expected more depreciation of that currency. On top of that, there has been a surge of oil and food prices in recent months.
Vos said that it projected that developing countries would be hit by the economic slowdown, as would many of the food and energy importing nations, because of the increases in prices.
It was only with concerted multilateral action that the international community could deal with the crisis.
Individual countries could not resolve it by themselves. Because of continuing uncertainty, the update mentions three scenarios -- a baseline, an optimistic and a pessimistic one, Vos said.