* World trade falls 9 pct this year as recession strikes
* Biggest contraction since World War Two
(Adds detail, byline)
By Jonathan Lynn
GENEVA, March 23 (Reuters) - Trade volumes will fall 9 percent this year, the strongest contraction since World War Two, as demand collapses in the biggest economic downturn in decades, the World Trade Organisation (WTO) said in a report.
The forecast -- much steeper than the 2.8 percent fall forecast by the International Monetary Fund in January -- underlines the scale and rapid deterioration of the economic crisis faced by leaders of G20 nations when they meet next week.
The report was originally scheduled to be released on Wednesday, but several media organisations published it on Monday.
The volume of developed country exports will fall 10 percent this year, while trade-dependent developing countries will see export volumes shrink 2-3 percent, the WTO said.
World trade tapered off sharply in the last half of 2008 to show growth of 2 percent over the whole year, after rising 6 percent in 2007, it said.
Just as trade typically grows faster than output expands, so now it is shrinking faster than the economy is contracting.
WTO Director-General Pascal Lamy noted that production of many goods is sourced all over the world, so there is a multiplier effect, with trade falling even faster as demand drops.
"Governments must avoid making this bad situation worse by reverting to protectionist measures which in reality protect no nation and threaten the loss of more jobs," Lamy said.
He said the use of protectionist measures, now being monitored by the WTO, was on the rise and risked choking off trade as an engine of recovery.
Since the recession began to take hold in the last quarter of 2008 there has been little cause for optimism about the trade outlook in 2009, the WTO said.
The banking crisis has contributed to a shortage of trade finance and deprived firms and businesses of credit, falling asset prices have made households unwilling to buy durable goods such as automobiles and falling commodities prices have hit many developing countries, it said.
Not even China with its dynamic economy has been able to insulate itself from the downturn, the WTO said, with its top trading partners in recession or suffering a slowdown.
While most major traders showed big drops in exports and imports of goods in January and February, some Asian economies such as China, Singapore, Taiwan and Vietnam were still recording import growth.
The WTO said data for one month must be interpreted cautiously but this could be evidence of a slowing decline or even a bottoming out of the negative trend.
Countries are also unlikely to repeat the double-digit declines in exports indefinitely otherwise China's exports, for example, would hit zero within 10 months, it said.
"This is obviously a highly implausible scenario and emphasises the reality that such steep declines as those we have witnessed recently will not persist," it said.
In dollar terms world merchandise goods exports rose 15 percent in 2008 to $15.8 trillion, while exports of services rose 11 percent to $3.7 trillion. Germany was again the world's biggest exporter in 2008, with merchandise exports of $1.47 trillion, just ahead of China at $1.43 trillion. (Editing by Louise Ireland)