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OECD ups global growth forecast, but warns on private debt

The global economy is strengthening but high levels of household and corporate debt raise questions about the sustainability of growth in the medium term, the Organisation for Economic Co-operation and Development said in its latest Economic Outlook.

The global economy will grow by 3.6% in 2017, up from the 3.5% forecast in September. Growth is expected to peak at 3.7% in 2018 before slowing to 3.6% in 2019.

"Growth has picked up momentum and the short-term outlook is positive, but there are still clear weaknesses and vulnerabilities," OECD Secretary-General Angel Gurria said.

"There is a need to focus structural and fiscal action on boosting long-term potential as monetary policy support is reduced. Countries should implement reform packages that catalyze the private sector to promote productivity, higher wages and more inclusive growth," he said.

Governments should take structural action, as well as using macroeconomic and macroprudential tools, to tackle the problem of household and corporate debt, the OECD said.

The U.S. economy is expected to expand by 2.2% in 2017 and accelerate to 2.5% growth in 2018 before falling back to 2.1% in 2019. The OECD also made upward revisions to its forecasts for the eurozone, which is now expected to grow by 2.4% in 2017 and 2.1% in 2018.

Higher inflation and ongoing uncertainty over the outcome of Brexit negotiations will continue to cloud the performance of the British economy, which is expected to grow by 1.5% in 2017, 1.2% in 2018, and 1.1% in 2019. Higher spending and investment, and accommodative monetary policy will power the German, French and Italian economies.

Japan is expected to grow by 1.5% in 2017 and by close to 1% in 2018 and 2019, with fiscal consolidation and the accelerated decline in the working-age population weighing on output. The OECD maintained its growth forecast for China, expected to expand by 6.8% this year and 6.6% in 2018.