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OECD raises growth forecasts but warns of increasing risks

The Organisation for Economic Cooperation and Development has raised its growth forecasts for this year and 2011 in its latest Economic Outlook.

In 2010 and 2011 the OECD forecasts that GDP across OECD countries will rise by 2.7 per cent and 2.8 per cent respectively. This is up from its last forecast in November last year when it predicted GDP growth of 1.9% in 2010 and 2.5% in 2011.

It warns that at the same time, the risk of overheating and inflation is rising in emerging markets.

In America, the OECD predicts GDP to expand by 3.2 per cent in 2010 and a further 3.2 per cent in 2011, while the eurozone economy is forecast to expand by 1.2 per cent this year and 12.8 per cent in 2011.

Meanwhile, if non-OECD members are added to the equation, the global economy is expected to grow 4.6 per cent in 2010 and 4.5 per cent in 2011.

Rising trade flows and strong growth in China and other emerging markets is helping pull countries out of recession, according to the OECD. However, it warns that at the same time, the risk of overheating and inflation is rising in emerging markets.

“A boom-bust scenario cannot be ruled out, requiring a further tightening in countries such as China and India,” says the report. “The knock on effect would be slower growth in other regions.”

Another risk for growth is the instability in sovereign debt markets, adds the OECD. This instability, the report says, has highlighted the need for the eurozone to strengthen its institutional and operational architecture.

As a result the Outlook says bolder measures need to be taken to ensure fiscal discipline.


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