PARIS (AFP) — The Organisation for Economic Cooperation and Development on Tuesday raised its forecast for US economic growth this year but cut its estimates for Japan and the eurozone, and said Britain faced recession.
The OECD, the Paris-based grouping of 30 developed countries, said the US economy would expand 1.8 percent in 2008, a sharp upward revision from a prediction in June of 1.2 percent.
Japan would grow 1.2 percent instead of 1.7 percent and the eurozone would expand 1.3 percent instead of 1.7 percent, the organisation said in an interim assessment of leading OECD countries.
The combined Group of Seven nations -- Britain, Canada, France, Germany, Italy, Japan and the United States -- would grow 1.4 percent, unchanged from the last analysis by the OECD in June.
In a statement, the OECD said "financial market turmoil, housing market downturns and high commodity prices continue to bear down on global growth."
The "eventual depth and extent of financial disruption is still uncertain" in the fallout from the US subprime home loan crisis, it added.
Overall, activity was likely to remain weak through to the end of 2008, with the picture "particularly unclear."
The revision to the 2008 US figure was mainly due to an unexpectedly strong second quarter, which the US government last week restated at 3.3 percent over 12 months instead of 1.9 percent as announced initially.
This performance was due "in part to the external trade balance and partly to fiscal stimulus which was seen quicker than expected," Jean-Louis Schneider, deputy director of the OECD economics department, told AFP.
In the third and fourth quarters, the US economy, the world's biggest, should grow 0.9 percent and 0.7 percent but these forecasts contain "great uncertainty."
The OECD does not exclude the possibility of a US recession but "we do not have projections for negative growth in the next quarters," Schneider added.
In Europe, the downward revision was also due to second quarter figures, which, unlike the United States, surprised on the downside, Schneider said.
The eurozone economy contracted 0.2 percent in the second quarter, according to official data.
"In the euro area and its three largest economies, as well as in the United Kingdom, activity is foreseen to remain broadly flat," Jorgen Elmeskovm, acting head of the OECD economics department, said in the statement.
However, Britain will fare worse, falling into recession over the second half of 2008, with the economy contracting by 0.3 percent in the third quarter and 0.4 percent in the fourth.
A recession is defined as two consecutive quarters of negative growth.
For full-year 2008, Britain's economy would post growth of only 1.2 percent, down from its June estimate of 1.8 percent, the OECD said.
The OECD said the revised British figures reflected the impact the badly hit housing sector is having on the economy.
Schneider said the British economy had been under pressure for two quarters and "our models suggest that with this sort of dynamic, it is very unlikely to stop there."
For Japan, Elmeskov said "only a partial bounceback from the second quarter fall in GDP is expected."
Japan's economy contracted 0.6 percent in the three months to June from the previous quarter, official figures showed.
On monetary policy, the OECD argued in favour of keeping interest rates on hold in the United States, eurozone and Japan.
"In Japan, different indicators of underlying inflation send mixed signals and deteriorating business sentiment, as well as the need for a buffer against the risk of deflation, argue for keeping monetary policy on hold," it said.
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