The financial crisis of the last two years has hurt living standards in already hard-hit developing countries and in those making the transition to a market economy, a UN report said yesterday.

The report, entitled "The world economy in 1999", says that, despite a recovery in world financial markets, "the outlook for the rest of 1999 and beyond suggests only a minor overall improvement".

"In a number of cases, the economic situation will continue to deteriorate."

The report said that 2 per cent world economic growth is forecast for 1999, following an estimated growth of 1.9 per cent last year.

But a growth rate of output per person of about 3 per cent a year needs to be sustained to allow progress in raising living standards and reducing poverty, the report says.

In 1996, a total 39 developing countries met that criterion, while 23 met the target last year. Only 13, including China, are forecast to meet it in 1999 - six in south and east Asia, six in Africa and one in Latin America.

The report noted that recovery in Japan would not only be important for that country, "but also crucial for supporting global growth, especially for boosting the recovery of the crisis-affected developing economies in Asia".

The report is on the agenda of next week's high-level Geneva meeting of the UN Economic and Social Council, to be opened by UN chief Mr Kofi Annan.