The International Monetary Fund says prospects for global growth have deteriorated over the past month.
A report issued Thursday by the IMF says world economic growth will slow from five percent in 2007 to just over two percent in 2009.
The report says many advanced economies will shrink next year, with the United States and Europe hit by tightening financial conditions and falling confidence. China's growth is projected to slow to just under 10 percent this year, and expand at 8.5 percent pace in 2009.
The report also says global action to support the economy may improve growth. The IMF says it will take time for efforts to support the economy to work, but they predict that a recovery will begin late in 2009.
The slowing growth is also expected to hurt developing nations by cutting demand for the commodities that are important to many of those economies.
The report comes just after the Bank of England and the European Central Bank slashed key interest rates in an effort to bolster the battered economy.
The Bank of England Thursday cut its benchmark lending rate a sharp 1.5 percentage points, bringing the interest rate to its lowest level in half a century - three percent.
European Central Bank officials also reduced their benchmark rate by 0.5 point to 3.25 percent.
The British and European actions follow rate cuts by other central banks around the world, aimed at making it easier for businesses to borrow the money needed to expand their operations and hire new people.
Following the announcements European stocks were down sharply, and U.S. stock prices were down as trading opened.
Earlier, trading on Russia's MICEX was suspended for an hour after stocks took a sharp dive. Key Asian stock indexes also plunged after Japanese-based automakers Toyota and Isuzu announced larger-than-expected cuts in their full year earnings forecast.
Also Thursday, France cut its economic growth forecast for 2009 and 2010. Finance Minister Christine Lagarde says the financial crisis is hurting the French economy, and says the growth forecast was the lowest ever made by the French government.