USA tax cuts and government spending increases will likely deliver a boost to the global economy this year and next, but that could be offset by an escalation of tensions over trade, the Organization for Economic Cooperation and Development said Tuesday.
On its latest forecasts, the OECD said "stronger investment, the rebound in global trade and higher employment are helping to make the recovery increasingly broad-based".
"We think the stronger economy is here to stay for the next couple of years", acting OECD chief economist Alvaro Pereira told Reuters."We are getting back to more normal circumstances than what we've seen in the last 10 years".
An improved outlook for world economic growth will be placed at severe risk if a trade war results from USA metal tariffs, a report has warned.
Financial markets have been hit by fears of a trade war following U.S. President Donald Trump's move to slap tariffs on steel and aluminum imports. "Certainly we believe this is a significant risk, so we hope that it doesn't materialize because it would be fairly damaging", Pereira said.
OECD forecasts for growth in 2018 and 2019
The OECD predicts the fastest world growth since 2011 this year, helped by United States tax cuts and spending in Germany. Previously the OECD had estimated three hikes would suffice this year.
Container ships are seen at a loading terminal at the Elbe river in the harbour in Hamburg, Germany, February 6, 2017. That's up from 3.7 per cent and 3.6 per cent respectively compared with its November projections.
"In Japan, where underlying inflation and inflation expectations remain low, current stimulus measures need to be continued to help achieve the inflation target", the OECD said. The Paris-based organization had expected growth to be 1.2 percent in 2018 and 1.0 percent in 2019.
In its interim economic outlook report issued Tuesday, the organization forecast global economic growth for this year at 3.9 percent, up from its previous suggestion of 3.7 percent. The OECD, which groups 35 developed economies, called on the world's major nations to avoid a dispute that could impede trade, demand, competition and, ultimately, the health of the global economy.
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