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OECD upgrades global and Japan growth outlooks for 2018 and 2019

13 March 2018

Trade tensions are threatening the best global economic growth outlook in seven years, the OECD said on Tuesday, adding that four USA rate rises are likely this year as tax cuts stoke the world's biggest economy while Brexit will drag on Britain.

City and academic economists expect the United Kingdom economy to expand at an annual pace of 1.5% over the next two years, and Chancellor Philip Hammond is expected to reveal a more optimistic outlook in updated official forecasts on Tuesday.

Mr Pereira said global growth would be led by a recovery in investment, while an increase in trade volumes of 5.2% in 2017 was expected to continue in 2018.

"Growth is steady or improving in most G20 countries and the expansion is continuing", the group said. But it also warned that the risk of trade wars could derail expansion.

The OECD predicts the fastest world growth since 2011 this year, helped by USA tax cuts and spending in Germany.

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.

However, the growth rate is still very slow compared to other G20 nations, and well below the average for the group, which is expected at 4.1% in 2018 and 4.0% in 2019.

"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.

And while eurozone growth is expected to ease off from 2.5% previous year to 2.3% in 2018 and 2.1% in 2019, major continental economies like Germany and France are forecast to out-perform the UK.

In Germany, growth is seen coming it at 2.4 per cent this year and 2.2 per cent next, up from 2.3 per cent and 1.9 per cent previously.

With the euro area economy resilient, rising inflation would allow the European Central Bank to reduce its bond purchases gradually this year and subsequently phase out its negative interest rate policy, the OECD said.

"Governments should avoid escalation and rely on global solutions to resolve excess capacity in the global steel industry".

"Safeguarding the rules-based global trading system is essential to prevent the longer-term harm to growth prospects that could arise from a retreat from open markets", it said.

OECD upgrades global and Japan growth outlooks for 2018 and 2019