The United Nations on Thursday slashed its forecast for world growth to 2.6 percent in 2012 and warned the eurozone debt crisis could further undermine the global performance.
"The world economy is teetering on the brink of another major downturn," the UN said in a warning that came as the International Monetary Fund said it would also lower its global growth forecast.
After rising 4.0 percent in 2010, the UN predicted 2.6 percent world growth in 2012 and 3.2 percent in 2013. UN economists had earlier said there would be 3.6 percent growth next year.
"This forecast is conditioned however on containment of the eurozone debt crisis and a halt to further moves toward stringent fiscal austerity in developed countries," said the UN World Economic Situation and Prospects report.
It said 2012 will be a "make or break year" with the world proceeding with slow economic recovery or falling back into recession.
Developing countries, led by China, Brazil and India, are predicted to continue pulling the world economy forward with average growth of 5.4 percent in 2012 and 5.8 percent in 2013. But even this is down from 7.1 percent in 2010.
"From the second quarter of 2011, economic growth in most developing countries and economies in transition started to slow notably," said the report which hit out at governments in Europe and North America.
The UN revised down its 2012 prediction for every major country and region: it now foresees 1.3 percent growth in the United States, down 0.7 percent from its last forecast, 1.5 percent for Japan (down 1.3 percent), 0.5 percent for the 27 nation European Union (down 0.8 percent), 8.7 percent for China (down 0.2 percent), 7.7 percent for India (down 0.5 percent) and 3.7 percent for South Africa (down 1.1 percent).
In Latin America, Brazil's 2012 growth was put at just 2.7 percent, down 2.6 percent from the earlier forecast.
"Failure of policymakers, especially those in Europe and the United States, to address the jobs crisis and prevent debt distress and financial sector fragility from escalating, poses the most acute risk for the global economy," the forecast said.
"Because of collective inaction, the situation is likely to deteriorate further," Jomo Kwame Sundaram, UN assistant secretary general for economic development, told a press conference to introduce the report.
"Unfortunately the likelihood of the pessimistic scenario is increasingly likely," he added.
The sovereign debt crises in Europe is a "cause and an effect" of the global slowdown while the United States is also suffering from unemployment and "shaken consumer and business confidence," said the report.
As the European and US economies are so close "their problems could easily feed into each other and spread to another global recession," the UN warned.
The IMF said Europe's worsening economy and financial market turmoil meant it was likely to revise downward its predictions made in its World Economic Outlook report issued in October.
"We will likely be revising downwards our forecast," IMF spokesman Gerry Rice told news briefing, without elaborating.
"The global recovery remains unbalanced and bumpy. Since that WEO there has been a marked slowdown in economic activity, especially as we all known, in Europe. The turmoil in the financial market is also contributing to further uncertainty about the economic forecast."
An update will be made in January, Rice added.