(Xinhua)
Updated: 2008-01-09 14:40

WASHINGTON - The World Bank warned Tuesday that the global economy was expected to slow to a modest pace this year but the soft landing was challenged by several "serious downside risks."

The World Bank headquarters in Washington DC [File photo]

The 3.3-percent modest growth this year, down from 3.6 percent in 2007 and 3.9 in 2006, was mainly caused by the slowdown in high-income countries, said the report titled "Global Economic Prospects 2008."

"Notwithstanding the financial turmoil provoked by a reassessment of risks in the US mortgage market, and despite large losses in some financial markets, exposure to asset backed securities appears to be broadly based," said the report, adding losses so far have been manageable, although credit conditions have tightened.

Growth in developing economies was a robust 7.4 percent in 2007, broadly unchanged from 2006. "This strong performance in the developing countries has offset somewhat the slowdown in US domestic demand that started with the unwinding of the housing bubble early in 2006," said the report.

During 2007, developing countries accounted for more than half the growth in world imports, contributing - along with the depreciation of the dollar - to strong net exports for the United States and furthering the reduction in global imbalances.

Among the major advanced economies, the projection for US growth in 2008 as a whole was at 1.9 percent. The World Bank also lowered the US economy's growth rate in 2007 to 2.2 percent from 2.9 percent in 2006.

Euro area growth was expected to slow to about 2.7 percent in 2007 and 2.1 percent in 2008, while growth in Japan was expected to ease from 2.0 percent in 2007 to 1.8 percent in 2008.

China's growth would continue its fast expansion in 2007 and 2008. It was expected to increase 11.3 percent in 2007 and 10.8 percent in 2008. India was expected to expand 9.0 percent in 2007 and 8.4 percent this year.

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