The international lender expected global growth to moderate to 3.3 percent this year from 3.6 percent in 2007.

"Developing countries, if you add them all up, are basically the same size as the US," said Hans Timmer, a co-author of the bank's annual Global Economic Prospects report.

"But they are growing more than three times as fast, and that means that their contribution to global demand is more than three times as important as the contribution of the US," he said at the launch of the report in Singapore.

Timmer added that, apart from mitigating the US slowdown, the resilience of developing economies had helped reduce global trade imbalances by sucking up American exports with the help of a cheaper dollar.

The bank said there were concerns that a faltering US housing market or further financial turmoil could push the country into recession and weaken demand for the products of developing countries.

Timmer said: "We still don't know exactly how many corpses are still in the financial markets, and how big, ultimately, the losses will be."

The bank believes, however, that the effect on consumer demand from problems in the US housing market will be limited. It expects the country's economy to regain momentum, leading to a pick-up in world output, which it predicts will expand by 3.6 percent next year.

The lender expected gross domestic product growth for developing countries to ease to 7.1 percent this year. High-income countries would grow by a modest 2.2 percent.


But Timmer warned that some developing economies were in danger of overheating, a risk that would be exacerbated if interest rates came down sharply as a result of a US economic slowdown, creating excessive liquidity in the global economy.

If capital flows turned away from the US, he warned, the funds would end up "somewhere in the developing world and that mechanism could create new bubbles or expand bubbles already in the making". He cited the Shanghai bourse and stock markets in India. The Shanghai composite index soared 97 percent last year, making it the world's best-performing major benchmark index. It became the most popular place for initial public offerings after New York.

"You can argue that that kind of an increase is probably not sustainable," Timmer said.

Further sharp declines in the dollar are a potential threat, despite the boost provided to US exports. The report warns that a less robust greenback provokes volatility in financial markets and increased trading costs, resulting in weaker export and investment growth worldwide.

To alleviate poverty, the report urges developing countries to harness better technology, saying rapid technological progress helped to reduce the proportion of people living in absolute poverty from 29 percent in 1990 to 18 percent in 2004.

Andrew Burns, the main author of the report, said: "Technological progress increased 40 percent to 60 percent faster … than in rich countries between the early 1990s and early 2000s. [But] developing countries have a long way to go, given that the level of technology they use is only one-quarter that employed in high-income countries."