Potential trade war threatens global economic growth, OECD warns

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Potential trade war threatens global economic growth, OECD warns

In its latest snapshot on global performance the Organisation for Economic Cooperation and Development (OECD) raised its growth forecast for both 2018 and 2019 to 3.9% - the highest since 2011 - from a previous estimate of 3.6%.

Global economic growth accelerated past year as higher investment and falling unemployment drove pickups in most major economies.

The OECD predicts global GDP growth of 3.7 per cent in 2018 and 3.6 per cent in 2019, an uplift from its last predictions in November thanks to a pick-up in world trade as well as the short-term boost from US President Donald Trump's fiscal stimulus.

The latest report lifted growth forecasts for the USA and euro zone economies.

However, it said the global economy was vulnerable to an eruption of trade tensions after the Trump administration slapped import tariffs on steel and aluminium. "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 eurozone economy will likely see a robust and broad-based expansion, with growth in gross domestic product estimated at 2.3 percent this year and 2.1 percent next year.

Against that backdrop, the Federal Reserve would probably have to raise interest rates four times this year as inflation picked up, Pereira said.

"Backed by the global trade recovery, minimum wage hike, and household income expansion, South Korea's economic growth will remain at 3 percent in 2018-2019", the OECD report said, retaining its former forecast for Asia's fourth-largest economy.

The OECD's latest economic outlook showed all but one G20 nation - Russian Federation - was set to grow at a faster pace this year than predicted last November.

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

Higher pay increases should support the Bank of Japan's still elusive goal of attaining its 2 percent inflation target, according to economists.

Ahead of the Spring Statement, the think-tank raised its United Kingdom growth forecast to 1.3% in 2018 amid a strengthening global recovery.

But 2019 is unchanged at 1.1%, compared to the OECD's most recent forecast in November, and both years are down on the 1.7% growth recorded for 2017.

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