UN: World economy to grow by 1.8 percent in 2008

"At issue is how deep and long this contraction will be," the report said. "As the housing slump continues and the credit crisis deepens, a broad array of ... indicators are already hinting at a recession."

It cited a decline in U.S. employment, consumer confidence at its lowest level in a decade, household spending growth slowing sharply and business equipment spending slowing alongside large inventories of housing and a 30 percent decline in residential investment.

This strongly suggests "that the implosion of housing activity will not stabilize until 2009," the report said.

As for other developed countries, the U.N. forecast that Japan's economic growth will decline from 2.1 percent in 2007 to 0.9 percent in 2008 and that Western Europe's growth rate will drop from 2.6 percent last year to 1.1 percent this year.

Despite the slowdown in global economic growth in 2008, the U.N. said global inflation is expected to accelerate this year to 3.7 percent.

The report said the recent sharp rise in commodity prices and the continued rise in oil prices are key factors spurring inflation along with higher wages.

The growth of world trade also slowed from 7.2 percent in 2007 to 4.7 percent in early 2008, largely due to weak U.S. demand for imported goods, it said.