GENEVA — The U.S. and China will remain the twin drivers of worldwide economic growth this year, though the continuing weakness of the dollar holds risks for the global economy.

That was a key finding of a report released this week by a U.N. economic agency, which predicted the U.S.’s gross domestic product would grow this year by about 3.5 percent, behind last year’s 4.4 percent rate.

The study, conducted by the U.N. Economic Commission for Europe, also warned that consumer spending in the U.S., which has been key to the country’s economic growth, “could also be restrained by a weaker-than-expected improvement in labor markets.”

The report also projected that the U.S.’s current-account deficit would reach $760 billion this year, 6.2 percent of GDP, up from $670 billion, or 5.7 percent of GDP, last year. Most of this gap, the report noted, is financed by massive purchases of U.S. government bonds by Asian central banks — in particular those of China and Japan, which have made those purchases to limit the appreciation of their currencies against the greenback.

“This situation exposes the U.S., however, to the risk of a sudden and sharp portfolio adjustment with associated downward pressure on the dollar and risks for overall economic stability,” the report noted.

Rumors earlier this week that South Korea’s central bank was going to sell off some of its dollar holdings prompted the currency to fall briefly, before South Korean officials said they had no such plans. The report warned that significant sales of dollars by Asian central banks could put the world economy into a tailspin.

A depreciation would boost U.S. exports but would also slow down demand for imports.

“Until now, European exporters have kept prices in dollars stable by squeezing profits, but this cannot continue for much longer if there’s a further appreciation of the euro,” said Dieter Hesse, senior economist at the ECE, in an interview.

This may prompt euro-zone countries to step up pressure on China to revalue its currency from its current peg of 8.28 yuan to the dollar.

On Thursday, EU Trade Commissioner Peter Mandelson, in a speech at Beijing University, called on China to take the first step and liberalize the exchange rate of the yuan to link it “to a broader set of currencies than the dollar, in order to reflect better its trading patterns.”

This story first appeared in the February 25, 2005 issue of WWD. Subscribe Today.

Chinese authorities have repeatedly said they are moving toward a flexible exchange rate regime but will only do so when the necessary reforms are done.