The World Bank says Nauru needs to find alternative sources of income as its income from running Australia's asylum seeker detention centre falls.
The Australian newspaper reported that the bank's latest review of Asia-Pacific economies predicted Nauru's economy would go into recession over the next financial year.
The bank said growth remained "dependent on the very uncertain outlook for the regional processing centre, which in turn is contingent on the extent to which asylum-seekers in Nauru are resettled in other countries".
The reopening of the centre in 2012 helped fuel economic growth at an average 20 per cent a year for three years, but the World Bank said growth had dropped to four per cent this year.
