It said the economies of developing countries, excluding China and India, would contract by 1.6 per cent this year and that foreign direct investment in emerging nations would drop by 30 per cent to $385bn.
The bank's overall forecast for global growth to fall by 2.9 per cent is a sharp reduction from its March prediction of a 1.7 per cent contraction, which it said then would be the worst on record.
Trade hit
The Washington-based multilateral lender said in its report that global trade is expected to plunge by 9.7 per cent this year, while total gross domestic product for high-income countries contracts by 4.2 per cent.
Eastern Europe and central Asia have been hit hardest and the region's gross domestic product is expected to plunge by 4.7 per cent this year, the bank said.
It said growth there should recover next year to 1.6 per cent.
In the Middle East and North Africa, growth is expected to fall by half this year to 3.1 per cent, while that of sub-Saharan Africa will drop to one per cent from an annual average of 5.7 per cent over the past three years.
China's growth
East Asia should post a five per cent expansion, supported in part by China's stimulus-driven growth, the bank said.
The bank said the global economy should start to grow again in late 2009, but "the expected recovery is projected to be much less vigorous than normal".
The report said that banks' ability to finance investment and consumer spending would be hampered by the overhang of unpaid loans and devalued assets.
"To break the cycle and revive lending and growth, bold policy measures, along with substantial international co-ordination, are needed," the bank said.