In its latest forecast, Zenith warned that advertising spend would fall 2.6%, or 4.7% in real terms. This means that the industry faces its worst recession since the early Nineties and indicates a sharp decline on forecasts two months ago, when it predicted that spending would fall by 1.5%.
Already in the major worldwide advertising markets, including the US, Japan, France, Germany, Italy, Spain and the UK, revenues of around $8bn (£5.5bn) -- a market the size of Italy -- have been lost, the agency said.
Zenith expects these seven biggest markets to grow by just 0.8% next year, or a decline of 0.8% in real terms, casting doubt over hopes of a recovery in 2002.
It forecasts a fall of 4.2% in the US, a drop of 1.8% across the European nations and the UK is expected to shrink by 3%.
Zenith has also trimmed its expectations for internet advertising, believing it will grow by just 10% in the US this year.
The media agency believes the downturn has been prompted by a general decline in profitability among the world's biggest advertisers. It said this was compounded by the deflation of the internet economy, although this had almost worked its way out of year-on-year comparisons.
Zenith warned that although cheap mortgage financing has propped demand in the US and the UK, the bubble of rising house prices could burst. This would knock consumer confidence. It believes unemployment, or the fear of it, could also add to a retreat in consumer spending.