The nation is expected to recover in the second half of 2002, but the outlook is not as good for the city

Alan Hevesi New York City Comptroller

"The nation is expected to recover in the second half of 2002, but the outlook is not as good for the city," said Alan Hevesi, the city's Comptroller, in the report.

In October, Mr Hevesi estimated that the terror attacks would cost the city's economy up to $105bn over two years.

In his latest report, he said that New York City's economy will have expanded by a modest 1.4% this year, in contrast to a booming 5.2% last year.

Bonuses suffer

The city's economy has been hit by the economy slowdown as well as the terrorist attacks in the heart of its financial district.

In particular, loss of income has bled the economy of its lifeblood.

In 2000, gains on the stock markets increased Wall Street's profits and swelled individual bonus packages.

In the first three months of 2002, bonuses are expected to be down $4.3bn compared with last year's $14.3bn, according to another report by New York state Comptroller, H. Carl McCall.

Some 3,278 people were killed and many financial companies lost their headquarters in the World Trade Center.

Job losses

Prior to the attacks, New York City's economy had outperformed the US economy.

The city lost a record 79,000 jobs in October, compared with a gain of 41,000 jobs in the first 10 months of the year.

For 2002, the Comptroller's office forecasts that unemployment in the city will grow to 6.7% from 5.7% in the two previous years.

Tax revenues are also expected to slip.

"My office projects that they will shrink by 7.1%, or $1.6bn, in fiscal year 2002," the report said.

In fiscal 2001, tax revenues increased by 4.2%.

Mr Hevesi is a Democrat who leaves office at the end of the year and a former Democratic mayoral candidate.