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OECD upgrades global economic outlook, export growth lifts Japan

08 June 2017

While Mexican investments that have since been put on hold are expected to resume, more turbulence from a protectionist push can't be ruled out, according to the OECD economic outlook. The group also sees a potential red flag in housing markets because prices in some countries have risen to levels that have in the past preceded busts.

The Paris-based economic think tank released a report Wednesday saying there should be further tightening of macro-prudential measures undertaken previous year, echoing recent advice by the International Monetary Fund.

The U.S. economy is projected to grow 2.1 percent this year and 2.4 percent next year, down from 2.4 percent and 2.8 percent projected in March, respectively.

The OECD also saw a potential for "swift snap-back" in US long-term interest rates when the Federal Reserve decides to reduce the size of its balance sheet, especially if it comes at a time of rising policy rates. "A sufficiently large shock could even threaten financial stability".

"Confidence indicators, industrial production, headline measures of employment, and cross-border trade flows have improved in most economies", the organization said.

The OECD's warnings come a week after the International Monetary Fund said a further tightening of macro-prudential and tax-based measures to mitigate speculative and investment activity should be considered.

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"It is a path toward normalization and is consistent with what the European Central Bank has been saying", said Catherine L. Mann, the OECD's chief economist, of its new advice.

In its latest economic outlook published on Wednesday, the organization of 35 countries said that global economic growth in 2017 and 2018 was expected to pick up pace but was still not sufficient to "sustain strong gains in standards".

Global growth remains below long-term averages, however, and wages are not yet growing as much as hoped.

The OECD stood by its economic forecasts for United Kingdom gross domestic product (GDP), predicting it to slow from 1.8 per cent to 1.6 per cent for 2017, before dropping to 1 per cent in 2018.

- With files from The Associated Press.

OECD upgrades global economic outlook, export growth lifts Japan