ROME - THE GLOBAL financial crisis and the collapse of the housing sector are a big blow for wood industries, but this is not necessarily good news for the world's forests, a new UN report said on Monday.

The report, published ahead of a conference on forestry held in Rome by the Food and Agriculture Organisation (FAO), noted new housing starts in the United States had more than halved between 2006 and 2008. Several other countries, particularly in western Europe, have witnessed similar declines.

'Wood demand is unlikely to reach the peak of 2005-2006 again in the foreseeable future,' the FAO's State of the World's Forests 2009 report said.

'Scaling down of production is widespread in almost all countries and all forest industries, from logging to sawmilling to production of wood panels, pulp, paper and furniture,' it said.

Countries that are highly dependent on US markets, such as Brazil and Canada, have already been severely affected, the report said, adding wood fibre demand in North America alone was expected to fall by more than 20 million tonnes this year.

While lower wood demand should be good news for the world's disappearing forests, FAO said the economic crisis could reduce investment in sustainable forest management and favour illegal logging.

'A more general concern is that some governments may dilute previously ambitious green goals or defer key policy decisions related to future climate change mitigation,' the report said.

It said European Union measures to tackle climate change, particularly auctioning emission allowances, were meeting some resistance, and the UN's REDD scheme - aimed at using carbon credits to save rainforests - could face similar problems.

Worldwide, the loss of forests was 7.3 million hectares (18.04 million acres) a year between 2000 and 2005, equivalent to 200 square km per day, according to U.N. data. Deforestation accounts for 20 percent of man-made carbon emissions. -- Reuters