The uncertain outlook for the world economy is set to dent revenues this year at WPP, the world's largest advertising agency said.

The company, which last year bought US rival Young & Rubicam, said economic conditions in North America were, compared with last year, "more challenging".

This was, however, likely to be offset by strength in the UK, continental Europe, Asia Pacific and Latin America.

But the real economic challenge might not come until 2002, if lower interest rates and US tax cuts overheat the economy and lead to inflation and wage pressures.

Nevertheless, like-for-like revenue gains are set to be in "the mid-single to high-single digit range" next year, and were likely to be in the region of seven per cent or more, chief executive Sir Martin Sorrell said.

This compared with the like-for-like revenue growth of 15 per cent seen in the year to the end of December, as WPP's profits rose 43 per cent to £365.7 million.

Group revenues rose by more than 37 per cent to £2.98 billion.

A number of factors fuelled the growth, particularly the impact of the US presidential election and the Olympics, which boosted advertising and marketing revenues.

The group saw strong growth in the US, UK, Continental Europe and Latin America, while Asia Pacific bounced back from its 1997 recession, said WPP.

Price inflation on network television, declining audiences, fragmentation of traditional media and the rapid development of new technologies were all changing the face of marketing and advertising, it added.

WPP's marketing activities during the year now accounted for 53 per cent of its group revenues, while internet-related activities brought in seven per cent of revenues.