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World Economic Forum’s annual report on Global Risks has warned that asset prices will continue to fall in 2010 amid economies bouncing back to life after the shock to the global financial system and world economy in 2008 and 2009.

Global Risks 2010 report released on Thursday has identified the risk in assets together with global governance gaps, chronic diseases and under-investment in infrastructure, fiscal crises and Chinese growth slowing to 6% as major risks this year and beyond.

On fiscal crises, the report challenges leaders not to balloon their debts running the risk of unsustainable levels of debt which in turn will exert strong upwards pressures on real interest rates.

“In the final instance, unsustainable debt levels could lead to full-fledged sovereign debt crises,” reads the report.

“Though their intervention proved vital, governments now need to avoid becoming the main cause of the next crisis.”

Global Risks 2010 further highlights that governments, in the United States and the United Kingdom in particular, are now faced with a set of tough choices, all with consequences for future global risks.

“The most pressing challenge is how to time a gradual and credible withdrawal of fiscal stimulus so that the recovery is sustained but not so late that fiscal deficits cause fears of sovereign debt deterioration and a flight to safety that could drain their economies of capital and confidence,” noted the report.

The report explains that governments need to develop sound exit strategies and communicate them clearly to reassure investors and taxpayers.

“Many governments must manage the critical maintenance and renewal of existing infrastructure, as well as new, large-scale projects in energy, transportation and urbanization, in the face of widening fiscal deficits and growing debt.”

Global Risks is an annual report on the most significant and underlying global risks facing the global economy.