Developed countries urged not to increase interest rates

It argued that the risk of runaway inflation as a result of higher primary commodity prices has been "considerably overestimated."

UNCTAD secretary-general Supachai Panitchpakdi warned that, in the current crisis, "measures to tighten monetary policy would exacerbate the global slowdown."

In its annual report on world trade, UNCTAD urged governments to introduce stricter regulation of commodity markets in order to rein in speculators, noting that "speculation typically exacerbates price trends originating from changes in fundamentals."

It also advised developing countries to promote diversification and industrial development in order to reduce their vulnerability to commodity price shocks.

It emphasised that such a transition requires higher investment in new productive capacity - the ability to manufacture more varied and sophisticated goods - and in public-sector infrastructure.

The report predicts that the world economy will grow by around 3 per cent in 2008, almost 1 point less than in 2007.

In the developed countries, GDP growth is likely to be around 1.5 per cent. The short-term outlook is better for the developing world, where growth could exceed 6 per cent.