World Bank forecasts low economic growth this year

Economic growth in developing countries will slow to 5.9 percent this year, down from 6.8 percent last year.

That's according to the World Bank's annual Global Economics Prospect report for 2006, which forecasts economic growth in developing countries will be 5.7 percent in 2006.

"That reflects different developments. We see the growth in the United States slowing somewhat; Japan being relatively stable at currently levels of just over two percent and a strengthening of growth in Europe," Andrew Burns one of the authors involved in the report.

Overall, the report says the slowdown among industrial economies, which began in the second half of 2004, continued this year. It predicts gross domestic product (GDP) growth will come in at 2.5 percent, down from 3.1 percent last year.

Burns says while economic growth in developing countries slowed down in percentage terms, it remains "very strong". The report predicts developing economies will continue to grow at very high rates, and more than twice as fast as high-income economies. Burns says its expected oil prices will decline over the next several years.

"We see the prices at US$60 a barrel for 2006. We expect them to average US$56 and to fall to about US$52 a barrel in 2007." Burns says unless steps are taken to assist the most vulnerable of the oil importing low income countries, they are going to have to meet that additional cost to pay for higher oil by cutting back on spending on other items.

The report warns that a future supply shock could drive oil prices even higher, potentially reducing global output by 1.5 percent for several years.

The report says persistent global imbalances, signs of rising inflation and concerns about the sustainability of government finances in industrialised countries are all factors that could push rates up, and possibly provoke a more serious slowdown.