The short-term outlook for the global economy is relatively favorable, but downside risks are dominating, according to a United Nations report released Tuesday.

The average annual rate of expansion of the global economy is forecast to be around 4.25 percent in 2005, said the United Nations Economic Commission for Europe in its Economic Survey of Europe 2005.

The rate is down from 5 percent in 2004, which was the fastest growth in three decades.

World merchandise trade will increase by 8 percent in 2005, strong but below the 10.5 percent achieved in 2004, says the report.

The United States and China will remain the principal engines of global growth, while rapid growth rates are also expected to continue in other Asian emerging markets and Latin America, it says.

However, the global outlook is surrounded by risks, which continue to be predominantly on the downside, according to the survey.

A major uncertainty is the likely development of the international oil markets. Oil prices remain subject to potential upward pressure from actual or threats of supply disruptions.

The fact that the global economy continues to rely so much on the United States as a major engine of growth evidently makes the outlook very vulnerable to a more pronounced slowdown of the US economy, says the report.