The UN today slashed its forecast for world growth to 2.6% in 2012 and warned the euro zone debt crisis could further undermine the global performance.
"The world economy is teetering on the brink of another major downturn," the UN said in a warning that came as the International Monetary Fund said it would also lower its global growth forecast.
After rising 4% in 2010, the UN predicted 2.6% world growth in 2012 and 3.2% in 2013. UN economists had earlier said there would be 3.6% growth next year.
"This forecast is conditioned however on containment of the eurozone debt crisis and a halt to further moves toward stringent fiscal austerity in developed countries," said the UN World Economic Situation and Prospects report.
It said 2012 will be a "make or break year" with the world proceeding with slow economic recovery or falling back into recession. Developing countries, led by China, Brazil and India, are predicted to continue pulling the world economy forward with average growth of 5.4% in 2012 and 5.8% in 2013. But even this is down from 7.1% in 2010.
"From the second quarter of 2011, economic growth in most developing countries and economies in transition started to slow notably," said the report which hit out at governments in Europe and North America.
The UN revised down its 2012 prediction for every major country and region: it now foresees 1.5% growth in the US (down 1.3%), 2% for Japan (down 0.8%), 0.7% for the 27 nation European Union (down 1.2%), 8.7% for China (down 0.2%), 7.7% for India (down 0.5%) and 3.7% for South Africa (down 1.1%).
In Latin America, Brazil's 2012 growth was put at just 2.7%, down 2.6% from the earlier forecast.
"Failure of policymakers, especially those in Europe and the US, to address the jobs crisis and prevent debt distress and financial sector fragility from escalating, poses the most acute risk for the global economy," the forecast said.
"Because of collective inaction, the situation is likely to deteriorate further," Jomo Kwame Sundaram, UN assistant secretary general for economic development, told a press conference to introduce the report. "Unfortunately the likelihood of the pessimistic scenario is increasingly likely," he added.
The sovereign debt crises in Europe is a "cause and an effect" of the global slowdown while the US is also suffering from unemployment and "shaken consumer and business confidence," the report said.
As the European and US economies are so close "their problems could easily feed into each other and spread to another global recession," the UN warned.
The IMF said Europe's worsening economy and financial market turmoil meant it was likely to revise downward its predictions made in its World Economic Outlook report issued in October.
