GENEVA, Sept 2: The global economy faces serious risks of a slowdown, the UN Conference on Trade and Development (UNCTAD) said in its annual report on Friday.

UNCTAD said that economic growth was set to drop to 3.0 per cent this year, from 3.8 per cent in 2004.

“The world economy is still expanding, but there are serious risks of a setback, and the moderation of growth over the first half of 2005 should serve as a warning,” the organization said in its Trade and Development Report.

UNCTAD pointed to the lengthy stagnation of the eurozone and Japan, saying this was a persistent source of instability.

In addition, it expressed concerns about the international impact of a slowdown in the United States.

“The main engine of growth, the US economy, may run out of steam before other countries or regions are able to take over that role,” it said.

UNCTAD urged a reduction in the US trade deficit, which last year reached a record $666 billion.—AFP