China would lead the region with growth of 7.7 per cent this year, slowing to 7.5 per cent next year, the bank said. In April, it expected China to grow 7 per cent this year.

Hong Kong's economy is expected to grow 1.6 per cent this year and 2.7 per cent next year.

'The anticipated pace of global economic recovery - with heightened turmoil in emerging markets - has been slower than expected,' said Jemal-ud-din Kassum, the World Bank's vice-president for East Asia and the Pacific. 'This year's sharp rise in world oil prices will sap income in the majority of East Asian countries, while recent terrorist attacks in Bali and elsewhere will depress tourism and business confidence.'

Export growth rates in many East Asian countries slowed in August from peak July levels, but the bank said it was too soon to say if that was a blip or a 'precursor of a more sustained slowdown'.

Uncertainties that could derail the recovery included a sharp fall in North American semiconductor equipment bookings in August and September, which meant a technology rebound may have faded.

While all these risks could be manageable if they happened by themselves, 'the joint occurrence of several could create as severe a global or regional shock as any in the post-war period,' the report said.

Indonesia had been particularly badly hit, with its US$5-billion-a-year tourism industry expected to suffer a severe and prolonged decline. It faced the prospect of slower growth, higher levels of poverty, and a tougher struggle to cut its budget deficit after the bombing last month, the report warned. It highlighted the growing risk that consumer demand - which has underpinned Indonesia's growth this year and last - could be undermined as confidence waned.

The bank trimmed its estimate for Indonesia's GDP growth this year to 3.2 per cent from 3.5 per cent. For next year, it forecast 3.2 per cent growth, in line with private-sector calls but far lower than the official 5 per cent target.

Soaring investment and government spending in China were cited as reasons behind its surging growth. China's growth would also help underpin exports between Asian countries as Japan's status as an export destination fades, the bank said.

Exports to China from other East Asian economies jumped by 50 per cent in the first half of the year. That was more than enough to offset declines in exports to other countries, particularly Japan. But while China's importance as an export market would grow, the bank did not expect the growth rate to stay that high.

Vietnam would be the region's second fastest-growing economy with a 6 per cent GDP rise expected this year and 7 per cent next year, aided by reforms, rising commodity prices and garment exports to the United States.