OECD upgrades world economy growth forecast to 3.9% – Highest rate since 2011

The global economy will see its strongest growth in seven years in 2018 thanks to a rebound in trade and investment, the OECD said on Tuesday.

The organization also warned that a trade war could threaten the improved outlook.

– The global economy will grow by 3.9%, up from the previous estimates in November of 3.7% for 2018 and 3.6% for 2019 – says the latest OECD report, covering all G20 economies.

The projected growth rate of 3.9% is the highest one since 2011.

Rebounding global business investment would keep global trade growth at about 5% this year, the OECD forecast.

However, it said the global economy was vulnerable to an eruption of trade tensions after the Trump administration slapped import tariffs on steel and aluminum.

– This could obviously threaten the recovery. Certainly we believe this is a significant risk, so we hope that it doesn’t materialize because it would be fairly damaging – acting OECD chief economist Alvaro Pereira told Reuters.

The OECD forecast the U.S. economy would grow 2.9% this year and 2.8% in 2019, with tax cuts adding 0.5-0.75 percentage points to the outlook in both years.

Euro zone will grow 2.3% this year and 2.1% in 2019, up from the forecast of 2.1% and 1.9% respectively.

Britain is lagging with a growth of only 1.3% this year, although up from a November forecast of 1.2%.

The forecast for Germany is 2.4% in 2018 and 2.2% in 2019, whereas the French economy should grow by 2.2% and 1.9% respectively.

OECD analysts forecast that China's GDP will grow by 6.7% this year and by 6.4% in 2019. They also project that Russia's economy will drop by 1.8% in 2018 and grow by 1.5% in 2019.

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Alvaro Santos Pereira