Bank president Robert Zoellick warned yesterday of ''social and political unrest'' in developing nations, which would face a $US270-$700billion ($A425billion-$1.1trillion) financing shortfall as richer nations crowded them out of the debt market.

''This global crisis needs a global solution and preventing an economic catastrophe in developing countries is important for global efforts to overcome this crisis,'' he said. ''We need investments in safety nets, infrastructure, and small and medium size companies to create jobs.''

A new bank report predicted global growth would be 5percentage points below its potential this year and industrial production would be up to 15per cent lower than in 2008 by mid this year. The biggest falls in world trade would be in East Asia, where Australia sells many of its exports.

''Advanced county imports are projected by the International Monetary Fund to contract by 3.1per cent in real terms compared to earlier expectations of no change in volumes, and further downward revision is likely,'' the report said.

''The counterpart to this is the expectation of a virtually unprecedented decline [of close to 1per cent] in exports from emerging and developing economies.''

The decline is hurting Japan, which logged a deficit of 172.8billion yen ($A2.74 billion) in January in its current account, a turnaround from the surplus of $18.5 billion a year earlier.

Exports almost halved from a year earlier, reflecting the rapidly worsening global economic climate. The result will have implications domestically as Japan will need fewer of the raw materials Australia provides to make its goods.

Westpac economists also downgraded the bank's expectations for the Australian economy yesterday, predicting it would contract by 1per cent this year, down from a 0.7per cent drop previously, before a modest recovery of 1.5per cent growth next year.

''We anticipate a 25per cent drop in business investment over the next two years, consistent with past recessions,'' they said.