OECD sees trade boosting global growth to 7-year high

OECD upgrades world growth outlook

OECD upgrades world growth outlook

As downside risks, the report cited persisting gestures of trade protectionism, the normalization of monetary policies in key countries, demographic changes and a decrease in mid- and long-term investment.

However, it said the global economy was vulnerable to an eruption of trade tensions after the Trump administration imposed import tariffs on steel and aluminium, a move that is expected to prompt retaliation from Europe and others.

But while it also revised slightly upwards its expectations for the United Kingdom economy - to growth of 1.3% during 2018 - it said Brexit uncertainty would continue to weigh on performance.

On the likelihood of a backlash against Mr Trump's threatened tariffs, he added: "This could obviously threaten the recovery. Certainly we believe this is a significant risk, so we hope that it doesn't materialise because it would be fairly damaging", Pereira said.

The boost to demand provided by Trump's tax cuts has meant that the OECD has revised up its forecast for U.S. growth by 0.4 points to 2.9% in 2018 and by 0.7 points to 2.8% in 2019.

Against that backdrop, the Federal Reserve would probably have to raise interest rates four times this year as inflation picked up, Pereira said. Previously the OECD had estimated three hikes would suffice this year.

The UK will be the slowest-growing economy in the G20 barring South Africa if the OECD's predictions come through, with growth well behind the 2.2 per cent average expected in the Eurozone or the 2.5 per cent annual expansion in the US.

On Britain, the OECD struck a particularly cautious note, pencilling in growth of only 1.3 per cent this year.

Among other hot economies, stronger growth in France and Germany boosted the outlook for the broader euro zone to 2.3 per cent for this year and 2.1 per cent in 2019.

Overall, there were 34.5 million people unemployed in the OECD area over the period, 1.9 million more than in April 2008 before the financial crisis, according to the report.

The US economy, by contrast, is seen expanding by 2.9 per cent this year and 2.8 per cent next, helped by the simulative effect of tax cuts. In its quarterly report, the Paris-based research body said it expects growth to ease off in some of those economies this year, but not by as.

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