Berlin - The patchy numbers of people wandering the corridors seems to say it all.

With less than a week to go before the end of the Berlin Film Festival, the mood in the European Film Market (EFM), the Berlinale's business side appears to be remarkably subdued.

"I'm sure this is half the number of people who were here last year," said the manager of a major national film stand in the EFM noting that the pile of brochures and promotional material was very slow moving.

It also has even been easy to find a table in the restaurants around the festival that are normally buzzing with activity by this time during the 10-day Berlinale. Even the number of parties, a key part of film festival life, seem to be down on previous years.

With the economic downturn rapidly gaining around the world, the global film business is bracing itself for what could be a tough year.

As a result, the Berlinale, which is the first big international film festival of the year, was seen as a key test of the current state of the world movie industry.

This is especially the case as Berlinale organizers have in recent years moved to take advantage of the festival's position ahead of the festivals in Cannes in May and Venice in September to build up the business side of the gathering in Berlin.

"I expected this," said one US film group executive. "It's the credit crunch. It's the economic downturn. Everyone is hurting."

Despite a strong box office year in many countries and a string of successful blockbusters, the credit crunch combined with turbulent financial markets and shrinking global growth have made movie company executives even more cautious about taking on new projects.

British director Stephen Daldry's The Reader, starring Kate Winslet which has been nominated for five academy awards was screened at the Berlinale and has received widespread critical acclaim.

But Daldry said that he had been forced to delay starting to shoot his latest movie in Serbia because the credit crunch had engulfed the production's financing.

Particularly badly hit appear to have been film markets in nations that have been born the brunt of the global economic firestorm and which have watched as their currencies have sunk as the downturn gained momentum.

Some film industry executives insist that movie deals are been done in Berlin this year but that budgets are been cut dramatically to accommodate the tough economic times.

Indeed, low-cost nations that have been promoting themselves as international movie production locations see the world economic slowdown and the tighter financing conditions as maybe representing an opportunity to attract more business.

Now in its 59th year, the Berlinale which is one of the world's top three film festivals is seen by the international film industry as presenting both an opportunity to showcase new movies for the year ahead as well as stitching together new pan-European movie financing deals.

More than 400 film companies from 55 nations are represented at the EFM this year with the Berlinale forced again to increase the number of venues for the EFM so as to meet the demand for exhibition space.

But the high cost of setting up shop in leading film trade markets such as Berlin, Cannes and the American Film Market especially during a time of economic distress means that some companies are already considering scaling back their representation at movie markets throughout the year.

Moreover, filmmakers and producers from Hollywood through to Bollywood complaining about cost-cutting, which has also begun to slow the process of completing projects.

In addition, the gloomy economic climate means that consumers are more likely to try to seek out other less expensive forms of entertainment than movie going with the resulting impact on box office takings around the world.

Already the big Hollywood studios have announced big layoffs as the downturn tightens its grip on the US economy. More jobs are expected to be lost in the coming months. (dpa)