The World Bank has warned that the global economy has reached a potentially dangerous 'turning point' with the US at risk of recession if the housing market crashes.
In a report called Global Economic Prospects, the Bank also said globalisation was an unprecedented opportunity for developing nations, although income inequality and environmental damage could undermine its benefits.
The twice-yearly report predicted growth in worldwide gross domestic product (GDP) of 3.2% in 2007, down from a projected 3.9% this year.
The report said growth in the US should ease gradually, but did not exclude a recession brought about by a housing crash following years of red-hot growth.
Among other major risks identified for the global economy, the World Bank report said an economic 'overheating' could provoke a sharper slowdown, while 'further inflationary pressure may yet emerge'.
A supply shock in oil markets could also disrupt world growth, while a 'disorderly unwinding' of global imbalances such as the US trade deficit remains possible. In the medium term, the risk remains that investors could 'rapidly lose confidence in the dollar' as the US economy slows and its current account deficit mounts.
The World Bank and International Monetary Fund have repeatedly warned that the global economy is dangerously out of kilter as China runs up mammoth surpluses and the US devours imported goods.
