The overall world economy would further decline in next few months, according to a forecast report released by the Austrian Institute for Economic Research (Wifo) yesterday.

The report said that the actual growth rate of the world economy will touch only 3 percent this year after an average growth rate of 5 percent for the past four consecutive years, and is estimated to be even lower next year.

Due to the deepening economic crisis, the world economy is "further weakening" and the sliding tendency will not halt in the near future.

In addition, the current global financial rescue plans "may not really permanently stabilize the financial system." The premise of a real recovery of the world economy is that "the American real estate market appears a favorable turn, and the liquidity and solvency problems of financial institutions are solved."

The report forecasted that the average growth rate of the US economy for the whole 2008 may be as low as only 1.5 percent. Influenced by the downturn of the US economy, the economy of the European Union is also weakened. Countries like Britain, Ireland and Spain are facing more serious economic situations due to severe real estate crisis.

The gross domestic production (GDP) of the eurozone decreased by 0.2 percent for the second quarter of 2008 compared with the same time last year, and the economy further decelerates in the second half of the year, which may attribute to an actual economic growth rate of only 1.2 percent for the eurozone for the whole 2008.

Although new EU countries may still seen an economic growth of 4.9 percent this year, due to an overall deteriorated financial condition, consumption in private sectors of the EU is estimated to be "obviously lower", and the general EU economy will "further decelerate".

The report also pointed out that the currently declining international prices of raw materials, especially the oil prices which have dived to about half of the peak price of early summer this year, have admittedly eased the tension of inflation.

However, the big fluctuation of the exchange rates between the world major currencies, especially the obviously decreasing euro/dollar rate for the recent few months reflects the expectation in the international foreign exchange market that the economic depression in the eurozone may be even severer than in the United States.