Developing countries face a combined financial shortfall of up to $700 billion, the World Bank has said.

A report released to coincide with an international development conference in London says private sector creditors are shunning emerging markets.

Only a quarter of the world’s 129 countries have the financial resources to blunt the effects of the global slowdown, the World Bank claims, while international financial institutions can no longer cover the shortfall themselves.

The warning comes ahead of next weekend’s meeting of G20 finance ministers and central bank governors.

“We need to react in real time to a growing crisis that is hurting people in developing countries,” said World Bank group president Robert Zoellick.

“This global crisis needs a global solution and preventing an economic catastrophe in developing countries is important for global efforts to overcome this crisis. We need investments in safety nets, infrastructure, and small and medium size companies to create jobs and to avoid social and political unrest.”

The global economy is forecast to shrink this year for the first time since the second world war, including the biggest decline in world trade for 80 years, a five per cent slump in the overall economy and a 15 per cent cut in global industrial production.

“When this crisis began people in developing countries, especially those in Africa, were the innocent bystanders in this crisis, yet they have no choice but to bear its harsh consequences,” commented Ngozi Okonjo-Iweala, managing director of the World Bank.

“We must look at poor people as assets and not liabilities. The new globalisation should mean we adopt new ways of caring for our infants, educating our youth, empowering our women and protecting the vulnerable.”