Jun. 23 – A World Bank report predicts that this year will end in slower growth with international capital flows projected to fall further to US$363 billion.

According to the Global Development Finance 2009: Charting a Global Recovery, developing countries will expand by only 1.2 percent by the end of the year compared to 2008’s 5.9 percent.

China and India will be responsible for most of the growth in the region and the reports says that when both are excluded, the GDP of the rest of the developing countries is estimated to drop by 1.6 percent.

The report also predicts that overall world growth will be negative with a 2.9 percent contraction of global GDP this year. It will be next year that global GDP is expected to recover by 2 percent then by 3.2 percent in 2011 with developing countries showing the most vibrant growth.

“The need to restructure the banking system, combined with emerging limits to expansionary policies in high-income countries, will prevent a global rebound from gaining traction,” said Justin Lin, World Bank Chief Economist and Senior Vice President, Development Economics said in a statement. “Developing countries can become a key driving force in the recovery, assuming their domestic investments rebound with international support, including a resumption in the flow of international credit.”

Growth in developing countries is forecast to be better for next year at 4.4  percent and 5.7 percent in 2011. East Asia and Pacific region growth should report a 5 percent growth this year and signs of recovery will come in by the second half of the year and the well into 2010 backed by China’s massive stimulus plan.

The report acknowledges that concerted global action against the crisis is still underway. “To prevent a second wave of instability, policies have to focus rapidly on financial sector reform and support for the poorest countries,” Hans Timmer, Director of the Bank’s Prospects Group said in a statement.

For a more detailed look at the World Bank report click here.