SEOUL - THE World Bank warned on Monday prospects for the global economy remained 'unusually uncertain' despite recent signs of improvement in parts of the world and cut its 2009 growth forecasts for most economies.

The World Bank, which has recently cut its forecast for the global economy to a contraction of 2.9 per cent from a projection for a 1.7 per cent decline set in March, released details on individual economies for the first time on Monday.

It also called on the governments around the world for 'vigilance' in drawing up exit strategy to reverse the recently expansionary monetary and fiscal policy once the world economy takes off for recovery.

The bank said in a Global Development Finance report released on the sidelines of an international conference in Seoul that the unprecedented expansionary policy could result in heavy adverse effects on the future policy if maintained after the recovery.

The World Bank also estimated economic growth in developing countries of 1.2 per cent this year, and said that without China and India, output would shrink 1.6 per cent. The development lender's preceding forecast, published in late March, put developing countries' annual growth at 2.1 per cent, and at zero if China and India were excluded.

In 2010, global growth was projected at 2.0 per cent, and that of the developing countries at 4.4 per cent, according to the bank. Excluding China and India, the developing countries would grow 2.5 per cent. China's economy was forecast to expand 7.2 per cent in 2009 and 7.7 per cent in 2010, while India's forecast was for 5.1 per cent followed by 8.0 per cent.

The latest World Bank forecasts on gross domestic product (GDP) - a measure of goods and services output in a country - came in a report, 'Global Development Finance 2009: Charting a Global Recovery,' published to coincide with a three-day Annual Bank Conference on Development Economics opening on Monday in Seoul.

The World Bank expressed concern about the thinning flow of private capital into developing countries, which has fallen nearly by half this year - 49 per cent - to US$363 billion (S$529 billion) compared with US$707 billion in 2008, after a record US$1.2 trillion in 2007.

The development lender also projected a 9.7 decline in global trade volume this year, before a 3.8 percent growth rebound in 2010.

'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,' Justin Lin, World Bank chief economist, said in a statement. -- AFP, REUTERS