A new U.N. Conference on Trade and Development report is warning global trade imbalances could trigger financial crises. 

The annual UNCTAD Trade and Development Report says the growth performance of the world economy will be threatened unless there is quick international action to redress trade imbalances.

The report finds the expansion of world output continued last year and is projected to grow by 3.6 percent this year. It also says output growth in developed countries is likely to continue, despite high prices for oil and industrial raw materials and a tendency towards more restrictive monetary policies.

But, it warns the risks of a slowdown are higher than a year ago.

UNCTAD economists say developing countries, including many of the poorest, have benefited from continuing strong demand and rising prices for primary commodities. They say developing countries have contributed to the fast pace of global growth, with an overall growth rate of about six percent.

UNCTAD Secretary General says this positive growth has been burdened with serious imbalances.

"The report emphasizes the risk of strong reliance, and the report actually uses the term, 'successive reliance' on the U.S. economy, which is the main engine of growth," he said.

The report says there are signs of increasing volatility in stock, commodity and currency markets. These are some of the ingredients of financial crises in the past. It notes the dollar is highly vulnerable, and international investors appear to have become nervous in the face of continuing global imbalances and rising interest rates.

But it adds there is little evidence of a looming major financial crisis similar to the Asian or Latin American crises 10 years ago.

Supachai explains there is a risk that the United States has become overburdened in its role as the consumer of last resort and as the locomotive of global growth.

He says for a long time the U.S. government has been able to ignore its enormous and growing trade imbalance as this has not come into conflict with sustaining full employment and price stability at home. But, he warns this can not go on and the potential for such a conflict is itself a key risk today.

"Because of the U.S. growth, we have been able to sustain global expansion. But, we also realize the threats of the lingering imbalances. We are not saying that it is going to tumble soon. But, if we want to prevent the negative repercussions, we better start thinking of having a global coordinated management of how to deal with the issue of imbalances," adviced Supachai.

UNCTAD economists say a sharp depreciation of the dollar would restore competitiveness and help rebalance the U.S. economy. But, it also would result in a marked slowdown in U.S. demand for foreign imports. They say this could reduce and even reverse the development progress and poverty reduction recently achieved by developing countries.