Developing economies are projected to grow by 7 per cent in 2006, more than twice as fast as high-income countries which expect to grow by 3.1 per cent, Dominique Van Der Mensbrugghe, co-author of the report, said yesterday via a video conference from the World Bank Office in Beijing.

He said central banks around the world had done a good job to contain inflation, while high oil prices had eased recently.

Growth in developing economies may slow over the next two years, but is expected to remain robust at more than 6 per cent in 2007 and 2008, he said.

However, if the housing market in the United States is weaker than expected, this would reduce demand for imported goods, which would have an adverse impact on exports and the economic growth of developing countries, he said.

"Disruptions in oil supplies might also trigger a renewed upward price spike," he said.

"If the central banks around the world raise interest rates higher than anticipated to head off inflation, it would also impact on investment and growth."

He was optimistic about capital flows into the East Asia region as it may push local currencies up, but this would also bring in new technology and new management. He gave the assurance that strengthening currencies such as the baht could be offset by increasing productivity.

Richard Newfarmer, the report's lead author and economic adviser of the World Bank, painted a rosy picture in the next 25 years.

"Over the next 25 years, markets will become more integrated, while developing countries will likely grow faster and become a major force in the global economy," said Newfarmer.

However, he said that stress over income distribution and labour markets could undermine potential

growth.

Moreover, failure to manage environmental pressure entails serious risks. He urged rich and poor countries to pay more attention to the global climate-change issue.

"Policy response to such stress is so far inadequate to the challenges, so new efforts are needed at both the national and multinational level," he said.

Growth would raise incomes and reduce absolute poverty, but Africa would lag behind, he said.

"Average per-capita incomes in developing countries are likely to double and more people from the developing countries will enter the 'global middle class'."

However, he warned that within some countries income distribution could become more unequal in coming years.

Incomes of skilled workers will probably rise relative to unskilled workers.

Wichit Chaitrong The Nation