Global trade may grow seven per cent in 2006, up from last year's revised six per cent expansion, the World Trade Organisation (WTO) said yesterday in a forecast it warned was uncertain.

In its annual review of trade trends, the WTO said the outlook was based on expected world economic growth of 3.5 per cent, slightly faster than the 3.3 per cent rise in 2005.

"World trade is expected to benefit from this slightly stronger economic growth - in particular in the EU," the world trade body said in the report.

But it cited a number of downside risks, including the possibility that US economic growth could falter due to higher real interest rates and energy costs, and that the fledgling EU recovery would not gather momentum.

"The global economic situation at the beginning of 2006 remains full of uncertainties," the WTO warned.

I mproved corporate finances and stock market gains seemed to point to a long-awaited recovery in investment in Europe, but p rivate consumption remained fragile, it said.

WTO Director-General Pascal Lamy said in the report that the global trading system was in a period of transition, and the best way to handle it would be to conclude the Doha round of free trade negotiations by the end of the year.

"In such a climate of uncertainty, (WTO) member governments must strengthen the global trading system by making it more equitable and relevant," he said.

World trade, as measured by merchandise exports, had grown by an exceptional nine per cent in 2004 but slowed to about six per cent in real terms last year, reflecting weaker global economic growth in the period, the WTO said.

The final 2005 figure was slightly below the 6.5 per cent predicted this time last year.

Fuelled by rising oil prices, Africa, the Middle East, Central and South America and the Commonwealth of Independent States, which groups the former Soviet bloc minus the Baltic states, had recorded strong export growth in 2005.

The share of world trade of Africa and the Middle East rose to its highest level in two decades.

Fuels and other mining products accounted for 16 per cent of global trade, the highest percentage since 1985, while agriculture slipped to a record low of less than nine per cent.

Exchange rate developments in 2005, including a slight appreciation of the Chinese yuan, appeared to have done little to reduce major current account imbalances, it said.

Germany remained the world's largest exporter, followed as in 2004 by the United States.