In its report, World Economic Situation and Prospects 2006, the UN says growth is expected to slow in most of the industrial world in 2006 - registering 3,1% in the US, 2,1% in Europe and 2% in Japan - while developing countries expand at a rate of 5,6%.

China and India remain the world’s most dynamic economies and the rest of East and South Asia is expected to increase by more than 5%.

Latin America lags behind with a growth rate of 3,9% as its largest economies, Brazil and Mexico, struggle.

The African continent’s economic expansion should remain solidly above 5%, according to the report.

Prepared in part by the UN department of economic and social affairs (DESA), the report shows that the economies of the least developed countries - buoyed by higher commodity prices - will grow by 6,6% in the coming year.

On the other hand, any scenario leading to a collapse in commodity prices would adversely affect these 50 nations, the report said.

One of the major phenomenon sapping the prospects for balanced growth in the world economy is the so-called "investment anaemia," UN Under-Secretary-General for Economic and Social Affairs José Antonio Ocampo told a news conference in New York on Tuesday at the report’s launch.

"It’s universal, with the exception of China," Ocampo said. "We point out that a major challenge is to recover investment in many parts of the world."

He added that greater investments by corporations and governments in machinery, new factories and infrastructure could help iron out the global financial imbalances that might undermine economic stability.

The report states that one of the gravest dangers to the world economy’s stability may lie in these global financial imbalances as the US’ current account deficit totals $800bn while Japan, emerging Asian and major oil- exporting countries amass saving surpluses of $100bn to $200bn each.

Since the US is a major producer of capital goods, a surge in investment by other countries in the machinery needed to power factories or build bridges, for example, would help close the country’s current account deficit by increasing US exports.

"The US has been running a deficit and it has generated the impression that it is not a serious problem," Ocampo said.

"But we point out that the impression is deceiving. The risk, although low, has very high costs."

Foreign investors help US officials cover the country’s current account deficit by investing in US dollar-denominated assets. If foreign investors lose confidence in the US economy, they could pull their money out and contribute to a financial crisis.

Ocampo also called for greater coordination of macro-economy policy among key industrial and developing nations. He said the International Monetary Fund (IMF), which was created to protect global financial stability, should play a central role in helping nations coordinate their macro-economic policies.