The International Monetary Fund has cut its global growth estimates blaming the effect of record oil prices and warning that there may be a further slowdown.
Despite the high oil prices, China remains an economic hotspot
World growth is expected at 4.3% this year, down from an earlier estimate of 4.4% and 5.1% in 2004, the IMF said.
US forecasts have been trimmed after Hurricane Katrina and in the UK the IMF sees growth below government targets.
Any dip should be short-lived, however, and there are bright spots with China and India tipped to power ahead.
"The world economy has proved tremendously resilient over the last few years," the IMF's chief economist Raghuram Rajan said.
"Disease, natural disasters and soaring oil prices have only caused minor blips in an overall picture of healthy growth," he added.
But "higher oil prices are a clear and present danger," Mr Rajan told reporters.
'Slanted to the downside'
The biggest concern for the IMF is that record oil and petrol prices deter consumers from spending.
Should that happen then the slowdown in the world growth may be more pronounced.
The IMF said its forecasts were based on an average oil price of $54.23 a barrel in 2005 but "persistently high oil prices will adversely affect activity".
On Wednesday, oil prices rebounded to close to $67 as Hurricane Rita threatened to disrupt US supplies.
"The expansion remains broadly on track," the IMF said in its twice yearly World Economic Outlook report. "Although the risks are still slanted to the downside."
Another cause for concern, are what the IMF calls imbalances in the world economy, with particular attention given to the state of the US current account deficit, or trade balance.
2005 GROWTH FORECASTS
The US current account - a measure of what the nation buys and sells abroad- is running a bigger and bigger deficit and may prove to be "a key medium term risk to the outlook" of the world economy.
In simple terms, the US is becoming too great an importer of goods and services, at the expense of its own exports, and is becoming increasingly reliant on foreign money to prop up its financial markets.
"While the benign situation could persist for some time, it will not continue forever and finding out just when it might end is not an experiment best undertaken," the IMF said.
At the same time, demand for products in Europe and Japan is diminishing, threatening to put even greater pressure on US exports.
By contrast, countries such as China and India are expanding quickly and running current account surpluses as firms from the US and Europe outsource services and buy cheap products such as clothing and electrical equipment.
The huge trade surpluses enjoyed by these countries could also prove destabilising, the IMF warned.
In the US, growth will hit 3.5% this year, down from an earlier target of 3.6%.
On the other side of the Atlantic, the UK is forecast to grow at 1.9% this year, well below the 3-3.5% forecast of Chancellor Gordon Brown.
Things are little better in the eurozone - which covers the 12-nations that share the single European currency - where growth will tick lower to 1.2% from an earlier forecast of 1.3%.
In Asia, the picture is rosier with the IMF predicting annual growth of 9% in China, up from its earlier prediction of 8.5%.
Japan looks to be back on the road to recovery with a forecast of 2% expansion this year
India's growth estimate also was increased by half a percentage point to 7.1%.
The forecast comes ahead of the IMF and World Bank annual meeting in Washington at the weekend, where debt relief for poor countries is expected to be discussed.