The world economy is in worse shape than previously estimated, the United Nations says in a report released Thursday. The U.N. says the worsening U.S. housing and credit markets are largely responsible for the gloomy forecast. From U.N. headquarters in New York, VOA's Alex Villarreal has more.

UN economic report

The U.N. report warns the global economy will come to a "virtual standstill" if the United States does not recover from its current financial crisis.

U.N. economists say they expect world economic growth to slow this year to 1.8 percent, down from the 3.4 percent they predicted just four months ago and 3.8 percent last year.

The organization's mid-year economic update predicts declines in all regions of the world.

The report's author, Rob Vos, says developing countries and those that import food and energy will be hit the hardest.

"The least developed countries will suffer strongly a downturn [in] 2008," said Rob Vos. "There might be some recovery but that's basically based on very country-specific conditions that we assume for 2009. Some countries struck by natural disasters or coming out of political conflict might have a recovery in that year, including countries like Myanmar or the Democratic Republic of Congo."

Vos said the slowdown of the U.S. economy is a key factor in the downward trend. He said contributing to the gloomy outlook is the surge in oil and food prices.

The U.N. calls on countries with saving surpluses to boost spending to invigorate growth. It also calls for greater investment in agricultural production in many parts of the world.